We came across a bullish thesis on AGNC Investment Corp. (AGNC) on Stock Picker’s Corner’s Substack by Stock Picker’s Corner. In this article, we will summarize the bulls’ thesis on AGNC. AGNC Investment Corp.’s share was trading at $9.94 as of Oct 24th. AGNC’s trailing and forward P/E were 26.16 and 4.93 respectively according to Yahoo Finance.
A closeup of the property portfolio, highlighting the REIT’s internally managed investments.
AGNC Investment Corp., a real estate investment trust (REIT) focused on residential mortgage securities, has emerged as a notable opportunity for income investors in today’s turbulent times. It currently offers a substantial yield of 14.23% with a share price of $10.20. The stock’s price has surged recently, driven by expectations of Fed rate cuts that would enhance AGNC’s net interest spreads and alleviate funding pressures.
Income investors are facing significant challenges in the current market environment, aptly described as the “Maturity Tsunami” by author James White. With the U.S. Federal Reserve poised to cut interest rates at their upcoming meeting, borrowers may benefit, but savers and income investors are left vulnerable. This impending “tsunami” refers to approximately $950 billion in high-yielding certificates of deposit (CDs) set to mature in October, forcing investors to reinvest at lower rates. This is merely the first wave; over the next year, an estimated $2.5 trillion in deposits will mature, alongside $8.9 trillion in government debt also seeking reinvestment opportunities. In total, this represents a staggering $12.5 trillion “Reinvestment Tsunami,” hitting retail investors the hardest. In this landscape, the importance of effective income investing becomes clear. An income portfolio can provide steady cash flow for expenses and potentially serve as capital for future investments.
The approaching “Reinvestment Tsunami” will likely push investors toward AGNC’s attractive yield, compounded by the company’s buyback program, which reduces available shares and could further elevate stock prices. Additionally, AGNC’s consistent monthly dividends and the federal requirement to distribute 90% of taxable income add to its appeal. While risks exist, particularly concerning high yields and fluctuating book value, the combination of a potential rate reversal and solid cash reserves positions AGNC as a compelling income investment for the current environment.
AGNC Investment Corp. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 19 hedge fund portfolios held AGNC at the end of the second quarter which was 19 in the previous quarter. While we acknowledge the risk and potential of AGNC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
