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It was only a couple of days ago I posted Serious Money: What's on your watch list? suggesting you had to be ready because you never know when an opportunity might arise to acquire a value proposition.Then yesterday the market was up but sluggish in anticipation of Federal Reserve chairman Ben Bernanke possibly announcing a cut in the overnight rate, so I pulled the trigger on the one stock I could get at the right right price that was the most interest rate sensitive.
- Annaly Capital Management (NYSE: NLY) is one of the stocks mentioned in Fortune Magazines "Ten Promising Stocks for 2009" and is currently paying almost a 15% yield at Friday's closing price of $14.92. The company borrows money at short term rates and only invests in long-term Federally backed mortgages. They have avoided subprime loans and derivatives entirely.
Here is what Fortune likes and I agree: Annaly is a real estate investment trust that uses short-term bank loans to make long-term investments in mortgage-backed securities. Annaly buys only mortgages guaranteed by government-sponsored (now government-controlled) enterprises like Fannie Mae and Freddie Mac. Annaly does not acquire un-guaranteed high risk notes.
- CEO Michael Farrell says the biggest question for Annaly shareholders has always been whether the federal government would stand behind Fannie and Freddie's mortgage guarantees if the duo ran into trouble. "And now we know the answer," says Farrell, referring to the government's bailout of Fannie and Freddie in September.
At least 75% of its assets are high-quality, mortgage-backed securities or short-term investments. All of the REIT's assets are agency certificates with implied AAA ratings backed by single-family residential mortgages.
Here are some other interesting metrics of note: It's book value is 1.06, it is earning a net income over 17%, and as a REIT it has been paying over a 92% dividend ratio.
Not only is this on numerous buy lists for 2009, but I will be writing about it further because it is the first one on mine too.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares of NLY.
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Reader Comments (Page 1 of 1)
12-17-2008 @ 5:10PM
chris12karen said...
If you "bought NLY for $14.80 per share locking in at an actual yield of 15.01%", and if it is on your buy list for 2009, then how can it be that you "do not own shares of NLY"?
Did you just sell it at the end of the day? Then what did you mean by "locking in"?
12-17-2008 @ 5:16PM
Sheldon L said...
chris,
My bad, the bio line at the end was a hasty cut and paste. It's corrected and I own it. I have no plans to sell in the near term. If it drops I may buy more.
12-17-2008 @ 6:03PM
william lindblad said...
This is indirect, and more in line with chasing value.
Something that I have pondered.
When economics go sour there remain certain items that are required. I gues that near all would consider food, water to be there, along with other items that would change person to person. To make sense, some would find an auto absolute, while others would have a different list. In any case, all have indispensable items of a personal nature.
With that in mind. How about items such as titanium pigment, and of course, those that mine and supply it. Silly, perhaps, but it will be around for a long time. It is the "white" in white paint. Items such as this are taken for granted.
The "for granted" might be a good shopping place?
12-17-2008 @ 6:24PM
Sheldon L said...
WL,
Always nice to receive your comments. I think your point is well taken but I think that it is a stretch. Food and water people will fight about -- pigment for paint, I don't think so.
However, if you are looking for necessities "once removed"...I would consider fertilzer semi-essential, salt and alcohol essential but not like water.
There is a long list -- funny thing is, in today's world it seems 'credit' is essential or everything comes to a grinding halt.
Now that seems like a good story.
12-18-2008 @ 5:52PM
Bill Baird said...
Just bought 500 shares at $15.00 bucks. I'm mostly buying stocks with high dividends, and holding on to them. Looking to get better rates than 4% CDs, and hopefully increased stock value in a year or two.
2-13-2009 @ 2:31AM
Teresa Saccone said...
Hi, I just wanted to express a little distress with this stock NLY, I bought in a month ago Jan 09 and I already lost 925.00, Whats up with that???
I was depressed!! Question: should I hold tight and have faith or sell, sell sell.