Annaly Capital Management, Inc. (NLY)

The bulk of NLY's lending comes from US Gov't MBS (Freddie Mac, Fannie Mae and Ginnie Mae). Meaning that they are backed by the full faith and credit of the US. Annaly has a margin of safety built into its lending unlike NFI and NEW. I think Annaly has been unfairly lumped in with the rest of subprime garbage.

I would be 100% invested in this stock, but would try to buy it at 13 or below. It's great dividend has saved our portfolio this year.

This stock seems to be recovering.

NLY has been unfairly hurt by the negative press surrounding the mortgage market. NLY only buys Freddie and Fannie backed mortgages (rated AAA). The default risk has been transferred to these agencies.

Additionally, the yield curve is steep, allowing NLY to make big profits by borrowing short and lending long. NLY will have a monster year in terms of earnings (I wouldn't be surprised to see a doubling of revenue in 2008). Add to that a double digit dividend yield (which will increase to an off-the-charts level if revenue doubles due to rules governing REITs), and you have the potential for sizzling returns over a 2 - 4 year time period.

The only real negatives I see here are 1) NLY getting unfairly lumped in with sector, and 2) the potential for a doubling of shares available for trading, diluting current investors. These negatives are more than made up for with potential revenue growth and dividend growth.

Truth be told, the credit crunch is actually good for companies like Annaly...

Annaly makes money on "the spread." It borrows money at one rate and invests it at another rate... hopefully a higher one.

Right now, that spread is awesome... The Fed has cut short-term rates to 2%. Annaly borrows at close to that rate. Meanwhile, Fannie and Freddie bonds, which Annaly holds, are yielding closer to 5% – a full three percentage points higher than the fed funds rate!

Annaly can't quite capture all that. But it can capture a two-percentage-point spread out of it. (At least that's the spread it was earning at the end of its most recent quarter.) The last time Annaly saw spreads like that was late 2001 to late 2003. Between capital gains and dividends, investors made safe, easy, triple-digit returns in Annaly.

Right now, Annaly uses seven times leverage. So if you multiply that seven times the 2% spread, Annaly is earning a 14% return on equity (this math is rough, but you get the basic idea).

Traditionally, Annaly's only traded close to its book value when there has been no spread to earn, like in late 2000 and late 2005. But now, it's trading close to book value. So it should be able to cover a 14% dividend yield. Fourteen percent!

It's so cheap now because people were worried about Fannie and Freddie. I think, with Treasury Secretary Paulson's guarantee, Annaly should be OK. Stockholders of Fannie and Freddie may be in trouble. But bondholders (like Annaly) are fine.

12% dividends in the next 3 quarters.

they make money on the interest spread which should improve

Its time to make some $$$ on the right side for once. Look at their history and the incredible crop in 2005. I predict this will happen within the next 2 - 3 weeks. I have loaded up on big PUTS$$$$$$$

dividend

I bought NLY for the dividend over 10 years ago.
They appear to be weathering the mortgage mess.

Great company, selling cheap.

Stable dividend stock - safe play in times like this.

Recommended by Bull Market.com

Moving on up. Pays a healthy dividend and has excellent mgmt.

SOLID PORTFOLIO OF LOANS LOW SUBPRIME EXPOSURE

has great dividend and good management

Wait a minute! I thought mortgage-backed investments were in the dumps. This has a beautiful penant pattern breakout.

Trailing P/E (ttm, intraday): 15.69
Forward P/E (fye 31-Dec-08) 8.82
Profit Margin (ttm): 83.60%

Holding mostly AAA government backed mortgages insures success in current and future market

As a capital investment company, Annaly will outpace the finacials in the next 3 months.