Investment Options Still Viable For Annaly

The Fed’s recent statements and stance on QE3 have significantly impacted trading in the REIT sector; in particular many analysts downgraded their projections for Annaly Capital Management (NLY). There has been an overreaction from many pundits and investors, but 2012 has clearly been challenging for Annaly’s earnings. Current shareholders should hold, but may consider hedging potential losses with a REIT that’s had stronger positive performance throughout 2012. Interested investors may consider alternative REITs or short Annaly in the near term. Investors that are bullish on Annaly’s outlook can consider this quarter an opportune entry point due to its declining stock price based on weak second-quarter earnings, recent downgrades, and the long-term implications of QE3.

American Capital Agency (AGNC), Capstead Mortgage (CMO), Hatteras Financial (HTS) and Chimera Investment (CIM) are some of the REITs most comparable with Annaly Capital. Annaly’s price is over 92 times earnings, substantially higher than the aforementioned REITs. Annaly’s price is 4.3 times sales and 0.94 times its book value; these ratios are lower than American Capital Agency and Hatteras Financial’s corresponding ratios. Annaly’s debt-to-equity ratio is around 6.09, this is lower than American Capital Agency, Capstead Mortgage and Hatteras Financial. Annaly’s annualized dividend is around $2.00, while American Capital Agency is around $5.00.

Annaly’s 0.17 EPS is the lowest among these REITs; American Capital Agency’s $4.16 EPS is the highest among these REITs while Chimera’s $0.52 EPS is the lowest aside from Annaly Capital. Annaly’s 81% EPS decline in 2012 is also the worst among these REITs while Capstead’s 15% EPS growth is the highest. To continue reading, click here.