Annaly Capital Management, Inc. (NLY): How to Buy a Dollar for 95 Cents

Not the only player out there

There are other companies whose core business is to trade the interest rate spread. Among the more well- known names are Chimera Investment Corporation (NYSE:CIM) and American Capital Agency Corp. (NASDAQ:AGNC). But I believe that Annaly is much superior to either one of these companies for two main reasons. First, Annaly is the 500 pound gorilla in the room of interest rate players – at a $15 billion market cap, Annaly Capital Management, Inc. (NYSE:NLY) is greater than both Chimera Investment Corporation (NYSE:CIM) and American, combined. Second, Chimera Investment Corporation (NYSE:CIM) has seen its net income cut by half from last year which raises some doubts in my mind as to the capabilities of its management. I prefer the long proven guidance of Annaly’s management. In addition, American invests in mortgages which are classified below investment grade. Annaly Capital Management, Inc. (NYSE:NLY) is much safer in that sense. It invests 75% of its portfolio in U.S backed securities and the remaining 25% in investment- grade securities. Nothing below that.

The fool looks ahead

I believe that low interest rates are here to stay for at least the next 2 years or so. If you wish to be paid 12% on your investment, Annaly is the safest investment you can make. It’s by far the biggest most sophisticated player in the interest rate arena. It plays a safe game, and most importantly – it’s highly committed to paying you dividends all along the way.

The article How to Buy a Dollar for 95 Cents originally appeared on Fool.com and is written by Shmulik Karpf.

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