Wednesday, September 26, 2012

American Capital Agency Corp (AGNC)

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

With as how complex AGNC is I just knew I was going to miss some things and it turns out its an important one.

American Capital Agency Corp focuses mostly on improving the book value. Thats a higher priority then making the most money they can. This is a big benefit to shareholders because every time they have an SPO and sell more shares it runs the risk that existing shareholders will see dilution in their value if AGNC cannot find better deals then they have in the past. If they can increase the book value which is a per share basis then everyone benefits not just new investors.

AGNC is very good at this having raised the book value 11 of the past 12 quarters. Keep in mind, that is through a couple interest rate cuts. With Bernake targeted QE3 to buying mortgages then the existing mortgages will start increasing in value because there is buying pressure and AGNC might be able to offload some of their own mortgages for a profit. At the least they can claim the value is higher of their existing ones.

If AGNC declaring all their mortgages are a higher value because of QE3 sounds fishy its probably because it is. I wouldn't think they increase in value I just care about the actual payments coming in from the people wanting to pay off their mortgage. But I can benefit from the rise. A high book value will increase the share price. The higher that gets then whenever it has its big 33%-50% drop will have it settle higher then without QE3.

I might sell if it gets high enough. Normally with dividend investing I will not do that because the dividend is increasing year over year and the company is increasing year over year. With 90% of my investments that is the case. AGNC is different and I have to think differently with it. We KNOW for a 100% fact that it will drop at some point by a lot. That's not an opinion or calling a top. AGNC themselves is saying this.

If we know how to deal with and plan for a setback then is it a setback? I'm keeping the dividend to buy more after the big drop to dollar cost average in with its own profits. If it gets high enough I'll sell and keep the money to rebuy in after the drop.

Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.


  1. Hey pulling a few quick comments:

    1)I like the comment contrasting AFL with AGNC.

    2)Keeping dividends as cash is a great idea with this investment. I am doing the same with RSO.

    3)If interest rates are low until mid 2015,how long do you think mREITS will tank as rates start to rise? Will it be an instant X?% plus 4X% during the first month? Is the level of the drop gonna be dependent on the growth of rates? What if fed announces it will increase interest rates... 1% and no more raises for a full year?

    I am trying to develop a plan now for an entry point to re-invest my reit dividends.

    1. I don't think it will be land trust fast where it happens in a week. More like what happened with ERF. Where the fear of a FUTURE interest rate hike will push it down more slowly. I could see it start 3 months before any rate hike.

      Good point on REITs. So many people seeking yield pushed those yields down that dont necessarily like REITs. When interest rates return they will leave. Probably not as dramatic.

  2. You are great at explaining things. I agree with most of what you say. You are much different from me as you are extremely cautious. I understand that with the fact that you have a goal in mind of how much you would like to make. I like to think of the Stock Market as my 3rd favorite money making hobby. 1st being local sales and 2nd being online sales but while most of my friends play video games I play the stock market. Thank You for all of your information over the past few months I have invested using your advice a number of times! Keep up the good work!

    1. You are quite welcome. Thanks for the compliments.