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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Grommit who wrote (12490)	5/22/2001 12:57:38 PM
From: Paul Senior	Read Replies (2) \| Respond to of 78618

Grommit, I give up on trying to figure out NLY. Too tough for me. I read where the CEO said, "We buy mortgage-backed securities issued by the government, Ginnie Mae, Fannie Mae and Freddie Mac, and they're backed by residential properties. We lever them up, and as a result we can make great earnings for our shareholders." They earn 12-15% on their equity. Apparently they have no long term debt (for the lever), but they have issued more stock recently. (Issuing stock is, as you likely know, common with REITS if they want to expand- since they have to pay out almost all their earnings which deplete funds in their pot.) It's just not comprehensible to me how NLY does so well. They seem to be a middleman so I'm surprised they can earn so much - seems to be more than the people who front the loans in the first place. Dividend near 10%, stock at its highest level since company went public (4-5 years). Very good performance. There's a ton of home mortgage refinancing going on now. The Marketwatch article I see about NLY is titled "REIT Thrives in Low-Rate Environment." And NLY does seem to be benefiting: since January, the stock regularly has been making new highs. For me, looking for an opportunity to capitalize on the boom, I choose the title companies. Here I can more easily convince myself I might believe how these businesses work and how they might benefit from these refinancings. Paul.