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"October-December net income available to common shareholders was $445.6 million, or 46 cents a share, compared with net income of $1.2 billion, or $1.94 a share, for the year ago period."
The high dividend-paying real estate investment trust saw its shares down almost 4% today which is unheard of for a stock that barely moves in either direction.
Annaly is a former favorite of Bill Gross of the Barron's Roundtable. Gross recently commented that
"Annaly levers six to seven times, which doesn't sound too risky relative to an investment bank that levers 10 to 15 times. Annaly buys almost exclusively government-agency-backed mortgages, so we'll call it credit-risk free. The real risk is the cost of money, and prepayments on their holdings. Annaly and companies like it are sort of modern-day banks without any infrastructure. Like banks, they aggregate deposits and make a spread. Annaly isn't on my list this year, but conceptually, a 14% yield from a six-times-levered agency-backed investment portfolio is better than a 2% yield from a bank stock when the bank has borrowed 10 to 15 times its assets and has a cumbersome infrastructure."
The question for value investors is whether or not this is just the beginning of problems for mortgage real estate investment trusts like Annaly Capital?
Yes, Annaly did not make as much money last quarter as most investors expected. However, when listening to the astute CEO Michael Farrell during the conference call it becomes obvious that Annaly is becoming more conservative as the market is becoming more risky.
"In this environment, I believe that it is best to be conservative in our approach to risk and performance. It is intended not only to protect our portfolio but also to prepare us to take advantage of opportunities as they arise."
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