At present, the mortgage industry is facing a challenging operating backdrop amid high mortgage rates and low origination volumes. Despite this, one can consider fundamental mREITs like Annaly Capital Management, Inc. (NLY – Free Report) .
Over the past month, the Zacks Consensus Estimate for MPB’s earnings has been unchanged for 2023 and 2024. The company presently carries a Zacks Rank #2 (Buy).
Looking at its price performance, over the past month, NLY shares gained 13.5% compared with the industry’s 11.4% rise.
Here are some factors that make NLY a viable investment option right now:
Agency MBS investments Provide Attractive Returns: The government-sponsored enterprises’ guarantee for the principal and interest payments makes Agency mortgage-backed securities (MBS) a safer investment choice. With the interest-rate hike cycle ending and interest rate volatility reducing, Agency MBS demand should be robust due to attractive nominal spreads. The long-term investment outlook for new Agency MBS investments remains positive due to wider spreads and strong fundamentals.
Hence, with $68.5 billion of its investment portfolio comprising highly liquid Agency MBSs (as of Sep 30, 2023), Annaly is expected to enjoy attractive risk-adjusted returns in the fixed-income markets. Moreover, the majority of the company’s Agency MBSs have an actual or implied “AAA” rating.
Liquidity Decent: Annaly is focusing on improving its liquidity and reducing leverage. At the third-quarter 2023 end, it enjoyed a strong liquidity position of $2.8 billion. Also, the company maintains an unencumbered asset portfolio aggregating $4.7 billion, which can readily provide liquidity in times of adverse market conditions. Hence, with a decent balance sheet, the company is well-equipped to support its businesses, even in times of economic stress and market volatility.
Leverage Strong: Currently, NLY has a debt/equity ratio of 1.09. This compares favorably with the industry average of 1.97. Given the relatively lower debt/equity ratio than its peers, the company is expected to be financially stable, even in adverse economic conditions.
Return on Equity (ROE) Superior: NLY’s trailing 12-month ROE reflects its superiority in terms of utilizing shareholder funds compared with its peers. The company has an ROE of 16.39%, higher than the industry average of 9.26%.
Other Stocks Worth Considering
A couple of other top-ranked stocks from the banking space are ACRES Commercial Realty (ACR – Free Report) and BrightSpire Capital (BRSP – Free Report) . At present, ACR and BRSP sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ACRES Commercial’s 2023 earnings has been unchanged over the past 30 days. Over the past six months, ACR shares have gained 19.1%.
The Zacks Consensus Estimate for BrightSpire’s 2023 earnings has been revised marginally upward in the past month. BRSP shares have gained 15.5% in the past six months.
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