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Is Arlington Asset Investment Corp (AAIC) Stock a Buy For 2021?

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Alex Smith
·3 min read
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Gator Capital Management recently released its Q4 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 29.18% for the fourth quarter, outperforming its benchmark, the S&P 500 Index which returned 12.15% in the same quarter. You should check out Gator Capital Management's top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.

In the Q4 2020 Investor Letter, Gator Capital Management highlighted a few stocks and Arlington Asset Investment Corp. (NYSE:AAIC) is one of them. Arlington Asset Investment Corp. (NYSE:AAIC) is a mortgage real estate investment trust. In the last three months, Arlington Asset Investment Corp. (NYSE:AAIC) stock gained 23% and on February 24th it had a closing price of $4.11. Here is what Gator Capital Management said:

"Arlington Investment (“AAIC”) is a mortgage real estate investment trust. AAIC’s liquidation value (or book value) is $5.90, and the stock is trading for $3.66. We don't think it will return to $5.90 in the near term, but we believe the stock can get to $5.60 (or 90% of the estimated Q4 book value) in 6 to 12 months, which is +53% higher than the current price.

The management at AAIC has made strategic changes to increase their liquidation value. During the third quarter, they bought back stock at a discount to increase the liquidation value from $5.63 to $5.92. When they report the 4th quarter, we expect they will announce they continued to repurchase stock. We estimate the liquidation value will rise to $6.10-$6.20. The company is involved in the mortgage market, so it is not a franchise company like Disney or Microsoft that you can own forever. This is just a trade from $3.66 to $5.60. We think the downside is minimal because management reduced risk earlier in the year. The company does not have much leverage. On recent conference calls, management has expressed a conservative stance about investing the company’s capital.

Insiders at AAIC purchased shares on the open market at the end of September and again in early January. We believe AAIC has attractive potential return without much downside."

Pixabay/Public Domain

Our calculations showed that Arlington Asset Investment Corp. (NYSE:AAIC) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best innovative stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website:

Disclosure: None. This article is originally published at Insider Monkey.