Anything can happen in this market. 2013 saw the mortgage real estate investment trusts (mREITs) just get creamed. That said, thus far 2014 is telling a different story. The mREITs are showing some signs of life. Now, I realize that anything can happen to quickly derail this momentum. A natural disaster in the U.S. could send global markets spiraling. Continued mediocre earnings from individual companies could send entire sectors into the red and take your investment value right down with it. Not so hot economic data like we saw this morning (1/23/14) could weigh. What does this mean for one of the bellwethers in the space, American Capital Agency (NASDAQ:AGNC)?
Believe it or not, the fundamentals and the technical chart are both improving, at least for now. My favorite combination is when we have technical support on the side of the fundamentals. Take a look at figure 1. Figure 1 shows price action in the last three months for AGNC. During the summer and Fall of 2013, where the chart begins (end of October 2013), AGNC's management team took a ton of realized losses in its mortgage backed securities investments. They simply liquidated a huge section of toxic assets to preserve the company's future and raise some cash. This in turn crushed net income in the third quarter, which I will discuss below, and took the stock down another 15% in a few short weeks. This selloff and negative momentum is reflected in figure 1. Tax loss selling began pressuring prices but there was resistance from bargain hunters that supported prices around the $19.00 level. In the chart, you can see this short-term bottoming action. Once January began momentum shifted. Fundamentally, the action is supported by the fact that the ten-year treasury yield has plummeted from over 3.0% down to 2.8% providing relief to the pressure rising rates put on asset values.......READ MORE
No comments:
Post a Comment