American Capital Agency Corp. (NASDAQ:AGNC) is the second-largest mortgage REIT and one of the best managed, too. As Bloomberg reports, it managed to minimize its losses during the second quarter as it disclosed a smaller book value decline compared to expectations. During the second quarter, the company experienced 12% decline in its book value, while its net interest spread plunged 3 bps over the linked quarter. Also, the prepayments speeds for its asset portfolio largely remained unchanged over the same time period.
It’s obvious that American Capital Agency reported the lowest book value and net interest rate spread decline during times when its aforementioned peers faced tremendous pressure. Much of this superior performance was a result of the re-balancing exercise conducted by management during the second quarter. In an effort to preserve book value, management got rid of some of its exposure in the troubled 30-year fixed-rate Agency MBS.
Poor performance continues to haunt ARMOUR Residential REIT, Inc. (NYSE:ARR). Lower asset balances and higher leverage became the reasons for the latest under-performance for ARMOUR Residential. Hatteras Financial was no different either. However, active management at American Capital Agency led the company to report the lowest book value and net interest spread declines among the three. So, I am bullish on American Capital Agency and recommend investors stay away from Hatteras Financial and ARMOUR Residential.
Adnan Khan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article Disappointment Continues to Haunt This High-Yielding Stock originally appeared on Fool.com and is written by Adnan Khan.
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