How To Get The Best Slice Of Annaly Capital (Archive)
I favor Annaly’s fixed‑rate Series J preferreds over common stock in the current rates backdrop.
This 5-Minute Pitch was originally published on Seeking Alpha. It is shared here to showcase my work and track record. I also publish full 5-Minute Pitches on this site. This will be behind a paywall, accessible to Hunter Tier members.
Elevator Pitch
- Annaly Capital faces potential NAV erosion from rising rates and term spread compression but currently trades near its historical valuation premium versus peers.
- Lower hedge ratios have increased NLY’s interest rate sensitivity, worsening the outlook if policy rates rise or stay elevated.
- Ongoing equity issuance dilutes shareholders but is partly offset by redeployment into higher‑yielding assets instead of lower‑yield agency MBS.
- Term spread compression threatens NLY’s net interest spread and dividend capacity, making the preferred shares relatively more appealing to income‑focused investors.
- Among NLY securities, the fixed‑rate Series J preferred stands out by offering an 8.875% coupon and potential price upside if long‑term rates decline.
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