Better Buy: AGNC Investment vs. Annaly Capital
The current environment has been downright awful for mortgage real estate investment trusts (REITs). These companies have a dark cloud over their heads as the Federal Reserve takes actions to rein in inflation. The two biggest mortgage REITs are Annaly Capital (NYSE: NLY) and AGNC Investment (NASDAQ: AGNC). Which stock is the better buy in this environment?
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The mortgage REIT sector has struggled this year as the Fed prepares to reverse the extraordinary measures it took to stimulate the economy in the early days of the COVID-19 pandemic. It has begun to raise the federal funds rate, or the rate banks charge each other for overnight loans; however, the biggest threat to the mortgage REIT sector is its huge portfolio of mortgage-backed securities the Fed bought over the past two years. The Fed's buying supported the book value per-share numbers for these companies, and as the Fed stops buying, this support has begun to reverse. You can see in the chart below that shares of both companies have stumbled this year:
Source Fool.com
