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3 Reasons It's Finally Time to Buy Annaly Capital Management
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3 Reasons It's Finally Time to Buy Annaly Capital Management

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Mortgage REITs faced a tough environment in 2013, and it may be in for more of the same in 2014. But there are still three great reasons to buy this industry giant.

Mortgage REITs faced a tough environment in 2013, and it may be in for more of the same in 2014. But there are still three great reasons to buy this industry giant.

Published in: Economy & Finance, Business

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  • 1. Rising and volatile interest rates made 2013 a difficult environment Source: Treasury.gov
  • 2. CEO and Co-founder Wellington Denahan-Norris has faced difficult environments in the past Source: BlockShopper Long Island
  • 3. Source: Treasury.gov **mREITs earn the difference between short- term (green) and long-term (blue) interest rates
  • 4. 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 1-Mar-04 1-Jun-04 1-Sep-04 1-Dec-04 1-Mar-05 1-Jun-05 1-Sep-05 1-Dec-05 1-Mar-06 1-Jun-06 1-Sep-06 1-Dec-06 1-Mar-07 1-Jun-07 1-Sep-07 1-Dec-07 1-Mar-08 1-Jun-08 1-Sep-08 1-Dec-08 1-Mar-09 1-Jun-09 1-Sep-09 1-Dec-09 1-Mar-10 1-Jun-10 1-Sep-10 1-Dec-10 1-Mar-11 1-Jun-11 1-Sep-11 1-Dec-11 1-Mar-12 1-Jun-12 1-Sep-12 1-Dec-12 1-Mar-13 1-Jun-13 1-Sep-13 1-Dec-13 1-Mar-14 Dividend - 2004 to 2014 Source: Nasdaq.com
  • 5. Because Annaly’s focused on protecting itself against risk…
  • 6. And has a total return of over 80% since 2009 Source: John Maxfield
  • 7. Mortgage REITs use leverage (borrowing) to magnify returns Leverage = Debt/Shareholder’s Equity
  • 8. Book value per share down 23% from 2012 to 2013 Interest income down 12% from 2012 to 2013
  • 9. It limits losses from interest rate risk Or The loss of securities value due to rising interest rates
  • 10. It gives Annaly HUGE buying power Or Liquidity to seize opportunities as they arise
  • 11. Assets – Liabilities = Book Value Annaly’s trading at a 8% discount to its book value
  • 12. 1. Poor returns in 2013 2. Future interest rate uncertainty 3. Recent dividend cuts
  • 13. A 23% discount to it’s historic price-to-book value should compensate your uncertainty