American Capital Agency Corp. (NASDAQ:AGNC), a $10 billion market cap real estate investment trust which invests in residential mortgage securities, was another of Elliott’s new picks as the fund reported a position of 3.1 million shares. The dividends have been strong recently compared to the stock price, though American Capital did cut its dividend payment at the beginning of this year. The yield is still good, and Elliott wasn’t the only hedge fund to like the stock during the third quarter as Renaissance Technologies- whose success has made founder Jim Simons a multi-billionaire- bought over 2 million shares of the stock (see more of Renaissance’s stock picks). Again, income investors may want to consider it.
Another REIT, Chimera Investment Corporation (NYSE:CIM), also made its debut at Elliott during the third quarter. The yield is good here as well, but dividend payments have been coming down: 9 cents per share in September 2012, 13 cents the year before that, and 18 cents the year before that. Chimera is more diversified than American Capital Agency, and so its assets include not only residential mortgage securities but also commercial mortgage loans. We suppose that it too is an intriguing income opportunity if the dividend payments stay constant or fall only slightly going forward.
Singer also liked NetApp Inc. (NASDAQ:NTAP), buying 500,000 shares of the data storage software and services company. NetApp was also one of billionaire George Soros’s picks for the quarter; he increased his holdings by 35%, making it one of his top five stock positions by market value (check out Soros’s favorite stocks). NetApp’s earnings dropped 34% in the third quarter of the year compared to the same period in 2011, which has contributed to a fairly high trailing P/E of 26, but Wall Street analysts think that the company will recover next year. Their forecast for 2013 implies a forward P/E of only 13. We think that we’d rather not rely on that that degree of improvement, and so would avoid the stock.