Hedge Fund Pine River Capital’s High Yield Picks Include Annaly Capital Management, Inc. (NLY)

American Capital Agency Corp. (NASDAQ:AGNC), an $11 billion market cap company which invests in assets including mortgage pass-through securities and collateralized loan obligations, was another of Pine River’s high yield picks.  Again, what is a high yield in percentage terms comes with significant risk, a fairly limited operating history, and a fairly recent cut in quarterly payments, though the opportunity is high enough that an income investor could certainly decide that the risk is worth it. Renaissance Technologies, founded by billionaire Jim Simons, was another major shareholder in American Capital Agency Corp. (NASDAQ:AGNC) (check out Renaissance’s stock picks).

According to the 13F, Taylor was buying shares of Home Loan Servicing Solutions Ltd (NASDAQ:HLSS) and closed December with 2.6 million shares in its portfolio. Home Loan Servicing Solutions services mortgages, so while it is not a real estate investment trust it is somewhat dependent on the mortgage market. The company began making monthly dividend payments only a year ago; the current yield is 7%. Billionaire Israel Englander’s Millennium Management more than doubled the size of its own position between October and December to a total of 2.4 million shares (research more stocks Englander was buying).

Pine River reported a position of 6.9 million shares in Anworth Mortgage Asset Corporation (NYSE:ANH), a REIT investing in mortgage backed securities with a market capitalization of about $890 million (over 1 million shares are traded per day). Quarterly dividend payments have been on the decline at Anworth, even over the last few years: payments peaked in mid 2009 at 32 cents per share, were 21 cents per share a year ago, and now sit at 15 cents. That does imply a dividend yield of close to 10% at current prices. As with the rest of these stocks, we think that investors should not get too excited about what is a risky dividend yield but it’s possible that REITs could be part of a larger income portfolio rooted in more established companies.

Disclosure: I own no shares of any stocks mentioned in this article.