Here's Why You Should Hold AGNC Investment (AGNC) Stock Now
AGNC Investment Corp.’s AGNC active portfolio-management strategy will help it navigate the current monetary policy transition. However, market conditions are likely to remain challenging in the near term with monetary policy tightening, whereas spread widening may affect book value.
AGNC Investment adheres to re-evaluation and adjustment of its portfolio, as well as hedges amid a varying interest rate and mortgage market environment. The company is operating in a more defensive position, with significant hedge protection due to market volatility. Such prudent asset-selection efforts may offer greater stability of cash flows and bode well for long-term growth.
The long-term investment outlook for the company’s new Agency mortgage-backed securities (MBS) investments is positive due to wider spreads and higher expected demand. Lower interest rate volatility will create a favorable macroeconomic backdrop for Agency MBS investments. Hence, with $55.9 billion of Agency MBS in its investment portfolio (as of Sep 30, 2023), AGNC Investment is expected to enjoy attractive risk-adjusted returns within the fixed-income markets.
AGNC has solid access to attractive funding across a broad spectrum of counterparties and financing conditions, along with cash and unencumbered Agency assets of $3.6 billion as of the third-quarter end. As a result, it has flexibility in the opportunistic enhancement of its portfolio. Hence, with significant repurchase agreements outstanding used to fund investment portfolio, the company seems to be less susceptible to undergoing a credit crisis in the near term.
However, the operating performances of mREITs depend on conditions prevalent in the broader financial markets and the macroeconomic situation. Any volatility in the mortgage market, unfavorable change in the shape of the yield curve, interest-rate volatility and deterioration of the generic financial conditions may affect the performance of the company's investments.
AGNC Investment continues to adjust its investment portfolio in sync with the current interest rate and global economic environment. With Fed reducing its Agency RMBS portfolio, persistent spread widening and higher volatility, the company has been trimming its investment portfolio. Moreover, as it prioritizes risk and liquidity management by reducing leverage over incremental returns amid challenging market conditions, robust returns are expected to remain elusive, at least in the short term.
AGNC Investment’s hedging strategies are not designed to shield it against fluctuations in tangible net book value, resulting from changes in the spread between the company’s investments and other benchmark rates like swap and treasury rates. This exposes its business to the risk of adverse spread changes.
Currently, AGNC carries a Zacks Rank #3 (Hold).
Shares of the company have declined 5.7% over the past six months against the 5.7% rise recorded by the industry.
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Stocks Worth Considering
A couple of better-ranked stocks are Stag Industrial STAG and Franklin BSP Realty Trust FBRT.
Earnings estimates of Stag Industrial have been revised marginally upward over the past month. In the past six months, STAG’s shares have gained 19.1%. Currently, the company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings estimates for Franklin BSP Realty have been unrevised for 2023 over the past 30 days. Shares of FBRT have gained 8.4% over the past six months. Currently, the company carries a Zacks Rank #2.
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AGNC Investment Corp. (AGNC) : Free Stock Analysis Report
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