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In December when I posted Chasing Value: Annaly Capital Mgmt -- from watch list to buy I was not just recommending Annaly Capital Management (NYSE: NLY), I actually was buying it.This residential REIT buys secured home mortgages, leveraging short term against long term rates.
At the time of my purchase it was paying a 15.1% yield. At yesterdays closing price of $15.28 it was at 13.21% -- still a very healthy yield -- and I received the following comment to the original story.
- Teresa wrote: 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.
On January 9, 2008 the closing price for NLY was $15.89, trading within a 38 cent range during the day. The short answer is that I would hold on and I am holding on. However, the more important question is -- what in the world are you doing in the stock market if you cannot tolerate 4% volatility? The market can and has done that in a day.
Why do you ask this question now since the stock hit a low of $14 during your holding period? Teresa was losing more at that point and has recovered from that low. The stock is trading up further today. To lose $925 we are talking about almost a $30,000 investment in a single stock, so our nervous Nelly is no small player unless she has not diversified her holdings. Hey Teresa please tell me that ain't so!
I see no reason to be worried about this this stock. The only things that I can think of that would affect my opinion would be if the Federal Government made some noise about not backing up the home mortgages or the long and short term interest rates converged to the point that NLY could not squeeze out any profit.
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 own shares of NLY.
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Reader Comments (Page 1 of 1)
2-13-2009 @ 8:24PM
william lindblad said...
If you did not catch house of cards, you missed something good. Harvard Boy has come of age and it is a masterpiece. No bias, just excellent reporting. The ending with Greenspan sums up all - now and future.
I just would like to know if negative amortization was his idea or someone else twisting his arm?
If you want to chase anything in the economic realm this is a must as it provides an insight into how we operate.
I agree with Alan - we did it - and we will do it again.
Hindsight is wonderful, but down in the trenches - it looks dire.
Whatever is here is new and unique to our time.
(I know this has little to do with the blog but I forgot the comment I had ready for the chasing value. Too bad as it was pretty good. What the hell-old age!)
2-13-2009 @ 9:14PM
David Van Dorn said...
I also find it shocking & some-what amusing that some one who invested that much $ in a single stock is worried about a $925 loss. I would say that NLY should be viewed as a high risk investment based on the business that they are in & the amount of the dividend that they pay. She should have been prepared for some volatility, or she shouldn't be in the market at all.