When Annaly (NLY) dropped through $17.50 a share recently, I started adding to my position.
My golden touch worked again, and the support at $17.40 failed today, putting the latest purchases underwater.
While not the “screaming buy” owning this stock at a discount to book value in our current rate environment would make it, I do think the prospects for continued high dividends for at least another year make it a better value than it’s been since last spring.
Annaly seems to be a charmed stock, in the sense that Wall Street and the institutional buyers like it so much that they let them grow themselves out of difficulty more than any other amREIT. By that, I mean NLY seems to have access to secondary issues when it gets burdened with unrealized losses more than its competitors.
Diluting unrealized losses is almost as good as doing deals that add to earnings. In normal circumstances, secondary issues above book value are almost magical, a kind of reverse Ponzi where the new investors bring enough money into the game that all the investors, both old and new, earn more per share after the stock issue.
I’ve marveled for years at Annaly’s ability to keep coming to the well.
From a fundamental standpoint, it’s clear (to me) that the Fed is not finished re-capitalizing the banking system on the backs of savers, so the steep yield curve is likely here to stay for several more years.
I still think this stock has the potential (along with the rest of the group) of dipping below a potentially lower book value after the Fed leaves the QE buying spree behind, but the recent decision to let Fannie and Freddie re-load their portfolios will probably offset that 600 lb gorilla leaving the market by letting two 500 pounders have their way.
If history serves as a guide, my purchases in NLY from $17.40 down to $17.14 won’t be a huge mistake, but you, kind reader can once again benefit from my reverse Midas touch if you want to.
This is NOT a stock advisory service. You pays your money and takes your own chances, just like I do.