American Capital Agency (NASDAQ:AGNC)

btucker100 (91.41) Submitted: 4/11/2009 10:27:45 AM : Start Price: $9.46 AGNC Score: +183.49

Invests in Gov backed real estate securities. Should recover with the market and has great dividend.

thestinkyfeet (98.48) Submitted: 3/30/2009 6:55:13 PM : Start Price: $9.55 AGNC Score: +169.57

The pitch for this stock can be found on the MF The Stinky Feet discussion board at
http://boards.fool.com/Message.asp?mid=27401444&sort=threaded

Stop by and let us know what you think of this pick.

Triplicate (< 20) Submitted: 10/19/2008 3:03:42 AM : Start Price: $8.35 AGNC Score: -243.90

The difficult credit markets will weigh heavily on AGNC despite its pristine portfolio.

NUKEWHALES (< 20) Submitted: 9/30/2008 2:27:57 PM : Start Price: $8.32 AGNC Score: -270.05

Respectfully disagree about AGNC's wonderful prospects. IMHO, it is skating on the thin ice of borrowing short and lending long in a very turbulent credit market. The same 8X leverage that is giving a current dividend return in excess of 20% can turn in a heartbeat into a massive hemmorhage of money if ACAS loses its ability to borrow at 2%-plus to finance a portfolio yielding 5%+. Overnight borrowing rate for London banks hit an astounding 6%+ last night. Are you bulls suggesting that ACAS can borrow on better terms than Barclay's?

Sure, that astonomical LIBOR spread may be a short term phenom--but then again, it may not.

Just because the underlying asssets are bullet-proof with respect to defaults does not mean they are risk-free. There is always an interest rate risk when you're running an unmatched book, and this book is unmatched on purpose. It is predicated on the assumption that short term rates will not rise for many years (the term of the govt-backed mortages), and that is a highly speculative proposition.

Given the spectacular horror of a global credit lock if Congress can't come up with an acceptable work-out procedure for ailing banks, AGNC puts might be a better bet than AGNC itself.

Sorry to be the bearer of bad news, but the credit markets are in far worse shape than the stock market (don't ask me why), but convergence of the small (equity market) toward the large (credit market) is a far more likely outcome than the reverse. And AGNC is essentially a credit market company.

JadedConsumer (< 20) Submitted: 9/29/2008 4:12:16 PM : Start Price: $7.94 AGNC Score: +286.77

AGNC is full of assets bought AFTER the subprime collapse, priced by parties that felt both the fear and the need for liquidity. I expect an opportunity for capital appreciation, since the default rate implied by home mortgage instruments exceeds the actual (single-digit) default rate.

AGNC hasn't got a big staff to feed; it pays ACAS a management fee that is fixed at 1.25% and doesn't stick AGNC with any caps: ACAS' management agreement doesn't involve a carried interest, so all AGNC's profit is AGNC's. ACAS gets its return as the owner of 7.5 million shares of AGNC, which is a pretty good assurance of fidelity: ACAS doesn't do well unless AGNC shareholders do well.

Yahoo's numbers on AGNC are bogus, since AGNC hasn't got twelve months of trailing dividends or profits:
http://jadedconsumer.blogspot.com/2008/09/investment-disinformation-at-yahoo.html

AGNC's dividend, which I predicted back in June to be at least 93¢ per full quarter ...
http://jadedconsumer.blogspot.com/2008/07/acas-scary-short.html
... turns out to be $1/q:
http://jadedconsumer.blogspot.com/2008/09/american-capital-agency-really-making.html

Since AGNC appears to be paying a bit less than its full profit in dividends, it's possible that AGNC is working on building up NAV to boost future investment principal (and to boost ACAS' management fees):
http://jadedconsumer.blogspot.com/2008/09/making-money-old-fashioned-way-with.html

In all this market chaos, it's interesting that AGNC has vacillated between trading at a substantial discount to NAV and trading at a PREMIUM to NAV. There is probably a short-term trade opportunity here as the shares near $15, given that it's recently closed at 20.
http://jadedconsumer.blogspot.com/2008/09/agnc-back-to-20.html

However, with a NAV that's likely to increase as the panic subsides and an investment portfolio which is entirely secured for TIMELY payment of principal AND interest by a federal agency or one of the companies the agency has taken over in conservatorship and has expressly stated it will back, it's hard to imagine the company faces great principal risk.
http://jadedconsumer.blogspot.com/2008/09/why-fannie-and-freddie-cannot-be-safely.html

The outsized returns of AGNC result from a leverage of about 8.3x assets, not the crazy 40x used by firms like MER. The spread that is leveraged is several percent, between AGNC's cost to borrow and the rate at which the guaranteed loans pay. Since homeowners can't get secured loans at rates as low as the most creditworthy corporations can obtain secured loans, this spread is likely to be fairly good into the future. AGNC is a financial company, but it's not like a bank: it hasn't got depositors who can withdraw money, and it can arrange its capital investments and its borrowings so that it can continue to control its ratio of available funds to committed funds. The difference between a non-bank and a bank in the financial sector is significant and shouldn't be overlooked:
http://jadedconsumer.blogspot.com/2008/09/acas-like-bank-but-different.html

AGNC is underpriced, its dividend is solid, and its management -- hired from ACAS, whose director was just put in charge of the government-overtaken Freddie Mac -- understands how to navigate the waters and has a commitment to dividends. Moreover, ACAS as the shareholder of approximately 50% of AGNC's outstanding shares has a terrific incentive to achieve the best possible returns in AGNC.

AGNC is a buy.

crazyrugger (87.93) Submitted: 9/24/2008 5:40:11 PM : Start Price: $9.25 AGNC Score: +234.84

If you take a look at its partner stock ACAS which has a similar dividend rate, it has shot up from $18 to $26-$28. While AGNC is down at $19ish, This gives them a 20%+ dividend rate, plus they have a relatively safe and positive revenue stream. With their government backed holdings I see this stock to raise after the RTC rescue. Plus if you look at the history of ACAS (AGNC is only 6 months old), they show a constant dividend payout, which to me represents a culture that AGNC will adopt, which they have already shown.

awallejr (84.20) Submitted: 9/20/2008 1:16:22 PM : Start Price: $8.95 AGNC Score: +251.38

Well after seeing that $1 dividend I did nltice it and I like the top bull's pitch.

waybol (< 20) Submitted: 9/7/2008 4:02:47 PM : Start Price: $9.44 AGNC Score: +234.87

When AGNC announces first full qtr dividend of over $1 a share end of September it will finnaly get noticed and price will go over $20.Whats not to like about a 20% dividend? Compare to NLY & CMO.I am looking foward to that $1+ a share going into my account!!I got in at $15.21 so I am going to get paid on both ends,gotta love that.

seadragons (77.79) Submitted: 9/4/2008 12:20:24 PM : Start Price: $8.64 AGNC Score: +264.27

AGNC, though a REIT, owns no real estate and is thus not a play on real estate prices. AGNC is an opportunity to make a leveraged bet (AGNC has 8x+ leverage internally) on the post-subprime-bomb underpricing of home mortgages. AGNC invests in home-mortgages backed by US government agencies and by US-backed entities like Freddie Mac and Fannie Mae. You may have noticed that Congress recently voted to authorize a bailout of those two, which seems to be an unusual degree of protection for AGNC's principal.

Folks looking at AGNC who don't dig get a pretty dismal picture of AGNC, with a seemingly-low dividend and an apparent collapse from its launch at 20.
http://jadedconsumer.blogspot.com/2008/09/investment-disinformation-at-yahoo.html

As I write, AGNC has paid a dividend on the one quarter that has ended since its inception, and that stub quarter involved only 27 days of investment. AGNC's profit in those 27 days of investment were $0.37/share, though, which annualizes to $5/sh. For a stock under $20, that's not bad, right?

Yes, AGNC gets principal payments and prepayments and must continulally work to keep its capital invested. However, AGNC has an ally in this effort: capped expenses. AGNC has no employees or facilities, but pays a management fee of 1.25% to ACAS, which bears all the risk of paying people enough to do the job right.

How many REITs have, right in the prospectus, a basis for shareholders to understand their expenses and make sure there's no penthouse in Manhattan, or a limo service, sucking away profits? Moreover, ACAS owns such a large stake in AGNC that it has a strong financial incentive to maintain its performance, and to grow its assets, that AGNC investors can expect faithful management.

At current prices, AGNC is paying a dividend over 22% per year, much higher than the <2% reported at this time by Yahoo. When the first full-quarter dividend is declared, and the first full-quarter earnings release is made, this stock could become much better appreciated. If not, I'm happy to take >20% dividends indefinitely as a second prize to capital appreciation.

beegdawg007 (< 20) Submitted: 8/20/2008 5:30:17 PM : Start Price: $7.96 AGNC Score: +297.13

will pay a dividend between $3.20 and $4.50/share over the next 12 months. Minimum stock value is $35/share.

ArturoQR (< 20) Submitted: 6/4/2008 3:56:09 AM : Start Price: $8.80 AGNC Score: +266.99

Should have huge dividends during the next 4 quarters(15 to 25% based on $20 price.