Annaly Capital Management, Inc. (NYSE:NLY) closed at $18.16 on October 13. The stock has returned -19% over the last six months, compared to a 21.5% return for the Insider Monkey Billionaire Index and 14.0% for the State Street SPDR S&P 500 ETF Trust.
Annaly Capital buys bundles of mortgages that other people have already written, mostly the kind the United States government stands behind. It also buys loans without that guarantee and owns the right to collect payments on some mortgages.
Annaly borrows cheaply against bundles and keeps the difference between what it pays and what the mortgages pay it. The borrowing is what makes the model work. It is also the bulk of the risk.
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The Borrowed Money Is Doing Its Job:
Debt runs to 737.54% of equity. That reads as alarming until you see what it produces. Return on equity is 19.57%, which is a strong figure for a company carrying far less borrower default risk than a lender does.
On the agency side of the portfolio, that risk is largely covered. If a homeowner inside one of those bundles stops paying, the agency standing behind the bond makes Annaly whole. What is left is the gap between short-term borrowing costs and long-term mortgage rates.
Investors with the deepest pockets have noticed. Only one company in our 10 Best Mortgage Finance Stocks To Buy According to Billionaires is held by more billionaires than this one. To see which, click HERE.
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Leverage Cuts Both Ways:
Borrowing on that scale magnifies everything. A modest move in the wrong direction on either side of the trade can do real damage to the value of what Annaly owns, and that value is what the shares are priced against.
The specific worry now is that rates stay high for longer than anyone expected. Annaly borrows short and holds long-dated assets. When short rates climb faster than mortgage rates, the gap the company lives on narrows.
The Price Against the Assets:
The shares trade at 5.08 times trailing earnings and 6.54 times what analysts expect next year. Both look cheap. Neither tells you much on its own, because reported earnings here move with the market value of the portfolio. The same swing runs through the return on equity.
Price-to-book is the measure that usually counts for a company like this, and it sits at 1.05. On that reading, you pay slightly more than the assets are carried at. Buyers today are not getting a discount on the portfolio. They are paying for the people deciding how much to borrow against it.
Conclusion:
Annaly is a leveraged bet on the space between what it costs to borrow and what mortgages pay. It has run that bet for a long time, and it runs it largely on bonds the government guarantees, which removes the risk most people worry about first. What remains is interest rate risk, and there is a great deal of it. You are not buying cheap assets here. You are buying the judgement of the people running it, and that is a harder thing to check.
Market Sentiment:
Annaly Capital Management, Inc. was held by 26 hedge funds with a combined stake value of about $320 million at the end of Q2 2026 in the Insider Monkey database. This is unchanged from 26 hedge fund holders with a cumulative investment value of around $270 million in the previous quarter.
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This article is originally published at Insider Monkey.
