This stock is a joke...all hype with analysts upgrades and a target of $65. Yea right its more like sell on the rise and target = 35. Dead money....
Sentiment: Strong Sell
In accordance with the terms of Annaly’s 7.50% Series D Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”), the Board of Directors of Annaly has declared the first Series D Preferred Stock cash dividend payable of $0.5625 per share of Series D Preferred Stock (which reflects the accrual of dividends since September 13, 2012 through December 31, 2012). This dividend is payable on December 31, 2012 to Series D Preferred Stock shareholders of record as of December 3, 2012.
Apache (NYSE: APA) is in the middle of a significant transition in its reserve portfolio, shifting its Capex towards its US onshore liquids fields. Most analysts have been forecasting reduced 2012 production given some offshore disruptions and this has weighted on the stock, but those disruptions have nothing to do with the strength of APA's core US onshore assets, which is where I think opportunities are located. Actually, as a powerful example of what might be coming for the company, APA has the industry’s second largest Permian proven reserves, with 751 MM boe. According to specialists, APA is in a position to grow its Permian production by 15% in 2012, ahead of its 13% yearly growth target which is set to give APA production growth of 7% from its whole asset portfolio from 2013 onwards. The company trades at a 7.8x 2012 P/E multiple and a 4.2x EV/Ebitda multiple, below most competitors. APA is not paying any significant cash dividends, but I would expect this to change in no more than a year when investments start to payback.
Apache Corporation (APA): Vice President F. Brady Parish Jr. Bought 4,750 Shares
Vice President of Apache Corporation, F. Brady Parish Jr., bought 4,750 shares on 11/05/2012 at an average price of $78.98. Apache Corporation is an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids. Apache Corporation has a market cap of $32.22 billion; its shares were traded at around $78.98 with a P/E ratio of 7.5 and P/S ratio of 1.9. The dividend yield of Apache Corporation stocks is 0.8%. Apache Corporation had an annual average earnings growth of 15.3% over the past 10 years. GuruFocus rated Apache Corporation the business predictability rank of 2.5-star.
On Nov. 1, Apache Corporation said that higher rig counts and new infrastructure contributed to record production from Permian and Anadarko Basin operations. For the three-month period ending Sept. 30, 2012, Apache reported production of 771,000 barrels of oil equivalent per day, up approximately 18,300 boepd, or 2.4 percent, from the same period in the prior year. Apache’s third quarter 2012 earnings totaled $161 million, or 41 cents per diluted common share, reflecting the impact of a $539 million non-cash, after-tax write-down in the carrying value of its properties in Canada resulting from lower natural gas prices.
Sentiment: Strong Buy
Annaly Capital Management (NLY), a big name in the sector that also reported third-quarter earnings yesterday, is down 67 cents, or 4.22%, to $15.21. Credit Suisse is out with a report maintaining its neutral rating on NLY but cutting its target price to $16 from $17, which represents a 2% discount to book value reflecting CS’s 9% 2013 ROE expectation for NLY. “While Annaly is trading at a discount to book value we see better total return prospects in our Outperform rated names,” CS writes, noting that Annaly currently trades at a 4% discount to third-quarter book value and yields 12.6% on the current dividend.
Sentiment: Strong Buy
Apple is thinking of dropping Intel....This will be Apple's doom !! Intel is a powerhouse when it comes to chip technology and not having Intel inside will hurt them in the future. Yes, they can make chips that power the devices but will not have the most powerful and therefore will begin to lose market share. Instead of focusing on device technology and farming out chip sets their greed will be their demise. BYE BYE Apple.
Sentiment: Strong Sell
Annaly Capital Management's (NLY) stock price has come under pressure lately. There's concern over the current round of Federal Reserve actions known collectively as Quantitative Easing as well as the death of CEO Mike Farrell. This has pushed NLY's stock price near its 52 week low. So is this a time to buy or sell this company? The answer is it is a great time to buy, for many reasons.
Let's start by talking about what NLY does and why it is such a talked about investment. Annaly buys, holds and sells Mortgage Backed Securities. They buy the "agency" MBS from Fannie and Freddie that, at this point, are essentially a government issued asset. They then leverage their holdings by borrowing short term against the value of those bonds, usually in the repurchase market, and use the borrowed money to buy more MBS. While leverage does bring on more risk, it can also increase returns, so adept buying and selling can generate much more profit than simply buying without leverage. They also collect the "spread" between the short term rate they borrowed and the longer term rate they receive from the coupon of the MBS.
Annaly is structured as a Real Estate Investment Trust, which is a specific business entity designed to return cash to shareholders. In exchange for the company not paying corporate tax, they must pass on approximately 90% of their earnings to the shareholders, who then pay tax on this income at the normal, non dividend, rate.
This lends itself to very high dividends, since so much of the earnings are distributed. Annaly currently yields about 12.5%. These dividends do fluctuate with quarterly earnings, but they generally remain very high by today's standards, usually in the double digits. This is partly the reason for their popularity; since yield is hard to come by in any normal savings or fixed income, something generating over 10% cash return with at least a good part of the safety of government issued bonds is very appealing.
Finally, Annaly has always been known as one of the highest quality of the Mortgage REIT companies. It's the largest of the MREITS, invests only in safer agency securities, and was considered to have one of the best and most experienced leaders in the field in CEO Mike Farrell.
So let's look at their stock price then and discuss why it recently has fallen to near a 1 year low.
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The biggest concern currently is the latest round of Quantitative Easing. The US Federal Reserve Bank is currently pursuing a policy designed to decrease the yield on Mortgage Backed Securities to make homes more affordable as well as increase the money supply. They are doing this by buying large amounts of MBS (one of their "large scale asset purchase" programs), thus driving down the yield on said securities. Of course, the yield for MBS is the top half of the spread that Annaly and others make money on, so the lower it goes, the less money they make.
Another thing that has happened specifically with Annaly Capital recently is a very sad occurrence; That is the passing of CEO Mike Farrell. Mr Farrell was considered to be an expert on fixed income and especially Mortgage Backed Securities and was clearly the man who built Annaly into the MBS giant it is. I always enjoyed reading his commentary, they were often amusing and very insightful. Obviously, his expertise and even personality will be missed.
Now that you've heard about why the shares of Annaly have fallen, why would I say this is a good time to buy?
Let's start by talking about the Federal Reserve, since that's the main concern with all these companies right now.
I actually agree that in the short term, their newest QE policy will decrease NLY and the other Mortgage REITS spread earnings. Nevertheless, these asset purchase programs will not last indefinitely, even when the latest program's unofficial moniker is "QE Forever"! When the program ends, the long term rates will rise, and the spread between short and long will widen right back out.
Additionally, these policies are designed to aid not only the general US economic recovery, but housing in general. As the economy improves, there will be upwards pressure on long term bonds and thus interest rates, which is good for NLY's earnings. As long as short term interest rates stay low, and the Federal Reserve Bank has total control over that, the mechanisms are in place for Mortgage REITS to make plenty of money. The Fed has pledged to keep short term rates low into mid 2015 now. I actually believe long term rates will rise faster than the short in the not too distant future, widening the spread that NLY uses to make money.
We're also already seeing housing prices and credit in the early stages of recovery. Home prices have been going up all year. Defaults are still falling, especially in consumer credit. Home owners are refinancing and have much stronger personal balance sheets. These effects improve the book value of Annaly's holding, which are often just as important to their stock price as their yield.
Now what about the leadership gap? The new CEO, Wellington Denahan-Norris, has had plenty of time to perfect her skills. She's worked with NLY and Mike Farrell since 1996. She is also one of the highest paid women in the world, and his been managing the MBS portfolio at Annaly for awhile. While she made some odd comments recently, popping off about central banks and kind of generally whining, it is safe to assume she knows what she's doing until we learn otherwise. She's definitely going in with lots of experience.
Also, Annaly has been experiencing a trend where they are getting more fees from third parties to manage their assets. According to S&P, this "is seen generating annual fees of about $87.7 million in 2012, up 10% from 2011." This could prove to be yet another way for the company to improve their earnings.
Finally, before, during, and after the worst mortgage bust in 80 years, Annaly has consistently proven that they can meet the challenges of the mortgage market through the business cycle and continue to deliver strong returns. That's not something Bear Stearns or Lehman Brothers can say. They are playing this Fed buying binge smart, keeping their leverage low so they can lever up when prices fall. I find it very likely that they will continue to pay extremely high dividends, something that is highly prized in this low yield environment.
Other investors feel likewise. I want to give you another chart to further illustrate why this is a good time to buy.
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You'll see this 3 year price chart, and you'll quickly notice that Annaly has dropped into the 15s three times but always rebounded. There's a 3 year history of price support in the mid 15s. This further indicates that the current sub 16 price is a great buying opportunity.
As a value investor, I like buying companies' stocks when there are some near term challenges but no longer term change in how that company makes money. A few quarters of compressed earnings really only presents a buying opportunity, a technique I have used many times to make money on companies like Visa, McDonald's, Intel and many others. This includes Annaly. It's a stock that I will occasionally sell when it reaches near the top of this trading range, but when it falls, I inevitably buy back in. I do this because I know the skill of this company in navigating the MBS markets, the high cash returns as I am paid to wait, and the improving quality of this asset class in general. I also know that the latest round of QE will not last indefinitely, and when it does, NLY will find itself in a "sweet spot" of low short term interest, and rising long term interest. In the meantime, you collect a 12% dividend, and what's not to like about that?
Sentiment: Strong Buy
Looking Forward: Analysts appear increasingly optimistic about the company’s results for the next quarter. The average estimate for the fourth quarter has moved up from $2.36 a share to $2.45 over the last sixty days. The average estimate for the fiscal year is $9.93 per share, down from $10.49 ninety days ago.
Sentiment: Strong Buy
Analyst ratings grade the stock a buy but point out that the operating efficiency is the problem and it is at its weakest it has been. Does anyone know what exactly is happening to lower the operating efficiency?
OVERALL RATING BUY
EARNINGS QUALITY STRONGEST
CASH FLOW QUALITY STRONGEST
OPERATING EFFICIENCY WEAKEST
BALANCE SHEET STRONG STRONG
VALUATION LOW RISK
Sentiment: Strong Buy