Here's Why Annaly (NLY) Stock is a Solid Investment Pick Now
At present, the mortgage industry is facing a challenging operating backdrop amid high mortgage rates and low origination volumes. Despite this, one can consider fundamental mREITs like Annaly Capital Management, Inc. NLY.
Over the past month, the Zacks Consensus Estimate for MPB’s earnings has been unchanged for 2023 and 2024. The company presently carries a Zacks Rank #2 (Buy).
Looking at its price performance, over the past month, NLY shares gained 13.5% compared with the industry’s 11.4% rise.
Image Source: Zacks Investment Research
Here are some factors that make NLY a viable investment option right now:
Agency MBS investments Provide Attractive Returns: The government-sponsored enterprises' guarantee for the principal and interest payments makes Agency mortgage-backed securities (MBS) a safer investment choice. With the interest-rate hike cycle ending and interest rate volatility reducing, Agency MBS demand should be robust due to attractive nominal spreads. The long-term investment outlook for new Agency MBS investments remains positive due to wider spreads and strong fundamentals.
Hence, with $68.5 billion of its investment portfolio comprising highly liquid Agency MBSs (as of Sep 30, 2023), Annaly is expected to enjoy attractive risk-adjusted returns in the fixed-income markets. Moreover, the majority of the company's Agency MBSs have an actual or implied "AAA" rating.
Liquidity Decent: Annaly is focusing on improving its liquidity and reducing leverage. At the third-quarter 2023 end, it enjoyed a strong liquidity position of $2.8 billion. Also, the company maintains an unencumbered asset portfolio aggregating $4.7 billion, which can readily provide liquidity in times of adverse market conditions. Hence, with a decent balance sheet, the company is well-equipped to support its businesses, even in times of economic stress and market volatility.
Leverage Strong: Currently, NLY has a debt/equity ratio of 1.09. This compares favorably with the industry average of 1.97. Given the relatively lower debt/equity ratio than its peers, the company is expected to be financially stable, even in adverse economic conditions.
Return on Equity (ROE) Superior: NLY’s trailing 12-month ROE reflects its superiority in terms of utilizing shareholder funds compared with its peers. The company has an ROE of 16.39%, higher than the industry average of 9.26%.
Other Stocks Worth Considering
A couple of other top-ranked stocks from the banking space are ACRES Commercial Realty ACR and BrightSpire Capital BRSP. At present, ACR and BRSP sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ACRES Commercial’s 2023 earnings has been unchanged over the past 30 days. Over the past six months, ACR shares have gained 19.1%.
The Zacks Consensus Estimate for BrightSpire’s 2023 earnings has been revised marginally upward in the past month. BRSP shares have gained 15.5% in the past six months.
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Annaly Capital Management Inc (NLY) : Free Stock Analysis Report
ACRES Commercial Realty Corp. (ACR) : Free Stock Analysis Report
BrightSpire Capital, Inc. (BRSP) : Free Stock Analysis Report
