Annaly Capital Management Braces for Further Interest Rate Increases in 2023
December 31, 2022
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NLY Intrinsic Value – Annaly Capital Management ($NYSE:NLY), Inc. is a publicly traded real estate investment trust (REIT) that specializes in mortgage-backed securities. The company invests in residential and commercial mortgage-backed securities, real estate securities, and other financial instruments. Annaly is headquartered in New York and is one of the largest mortgage REITs in the United States. Despite the central bank’s decision to raise interest rates by only 50 basis points in December 2022, following four increases of 75 basis points earlier in the year, this does not mean that it is becoming more dovish. In fact, it is anticipated that persistently high inflation will lead to new highs for interest rates in 2023. Higher interest rates are expected to reduce the demand for mortgage-backed securities, which will impact Annaly Capital Management. The company is bracing itself for the interest rate hikes and has already begun to adjust its investment portfolio accordingly. Annaly has been actively reducing its exposure to mortgage-backed securities, as well as increasing its investments in higher-yielding alternative assets such as commercial real estate and private equity. The company has also taken steps to reduce its debt levels in order to mitigate any potential losses that may arise from the expected interest rate hikes. Annaly Capital Management has also implemented a number of cost-saving initiatives to help offset the potential impact of higher interest rates. These include reducing staff, consolidating its operations, and optimizing its overhead expenses.
Additionally, the company is looking for new opportunities in the private sector in order to further diversify its portfolio. Overall, Annaly Capital Management is bracing itself for further interest rate increases in 2023. The company is taking proactive steps to adjust its portfolio and reduce costs in order to mitigate any potential losses that may arise from the expected hikes. Although the interest rate hikes may present some challenges for Annaly, the company is well-positioned to weather any storm that may come its way.
Price History
On Friday, Annaly Capital Management’s stock opened at $21.2 and closed at $21.1, a decrease of 1.4% from its last closing price of 21.4. This decline reflects the markets’ response to the announcements that the Federal Reserve and other central banks may raise interest rates next year. The potential for higher interest rates has caused concern for many analysts and investors. Annaly Capital Management, in particular, is particularly vulnerable to changes in the interest rate environment due to its heavy reliance on borrowing money to finance its investments. Rising interest rates would reduce Annaly Capital Management’s profits, since the cost of borrowing would increase while returns on investments would remain the same. In order to protect itself from this risk, Annaly Capital Management has taken steps to diversify its portfolio, such as investing in mortgage-backed securities and other more stable investments.
It is also looking at alternative financing options such as using debt-based securities, which would allow it to take advantage of the current low-interest rate environment without having to worry about potential rate hikes down the line. Annaly Capital Management also plans to continue reducing its leverage in order to protect itself from potential losses resulting from higher interest rates. By reducing its debt levels, Annaly Capital Management can reduce its exposure to any potential losses due to changes in interest rates. Ultimately, Annaly Capital Management is taking steps to protect itself from potential losses if interest rates do increase next year. While the media sentiment remains largely negative, Annaly Capital Management is doing its best to prepare for any potential rate hikes. Live Quote…
About the Company
Income Snapshot
Below shows the total revenue, net income and net margin for NLY. More…
| Total Revenues | Net Income | Net Margin |
| 3.23k | 2.92k | – |
Cash Flow Snapshot
Below shows the cash from operations, investing and financing for NLY. More…
| Operations | Investing | Financing |
| 4.22k | 4.9k | -7.88k |
Balance Sheet Snapshot
Below shows the total assets, liabilities and book value per share for NLY. More…
| Total Assets | Total Liabilities | Book Value Per Share |
| 85.41k | 74.46k | 19.93 |
Key Ratios Snapshot
Some of the financial key ratios for NLY are shown below. More…
| 3Y Rev Growth | 3Y Operating Profit Growth | Operating Margin |
| – | – | – |
| FCF Margin | ROE | ROA |
| – | – | – |
VI Analysis – NLY Intrinsic Value Calculator
ANNALY CAPITAL MANAGEMENT is a company with strong fundamentals, which reflect its long term potential. This can be seen through VI, a simple and easy-to-use app that analyzes the company. According to the app, the fair value of ANNALY CAPITAL MANAGEMENT share is around $21.4. Currently, the stock is traded at $21.1, making it a fair price but slightly undervalued by 1%. In terms of fundamentals, ANNALY CAPITAL MANAGEMENT has a solid financial track record, with a strong balance sheet and positive cash flow. This means that it is able to meet its short-term financial obligations. Overall, ANNALY CAPITAL MANAGEMENT has strong fundamentals, making it an attractive long term investment option. The current share price of $21.1 is slightly undervalued, making it a fair price to buy in at. More…
VI Peers
Annaly’s primary business objective is to generate net income for distribution to its shareholders from its portfolio of mortgage assets. Annaly is managed and advised by its subsidiaries, Annaly Management Company LLC and Hollister Asset Management LLC. As of December 31, 2018, Annaly had equity investments in 97 real estate investment trusts (“REITs”) and 12 companies that are engaged in the business of owning and operating real estate assets (the “Operating Companies”). AGNC Investment Corp., Dynex Capital Inc., Chimera Investment Corp., and Annaly Capital Management Inc. are all companies that invest in mortgage assets in the United States. These companies all have different strategies and focus on different aspects of the market, but they all aim to generate income for their shareholders.
– AGNC Investment Corp ($NASDAQ:AGNC)
AGNC Investment Corp is a real estate investment trust that invests primarily in residential mortgage-backed securities. The company has a market cap of 4.37B as of 2022.
– Dynex Capital Inc ($NYSE:DX)
Dynex Capital Inc is a mortgage real estate investment trust that invests in and manages a portfolio of mortgage-backed securities. As of December 31, 2020, the company’s investment portfolio totaled $9.6 billion. The company has a market cap of $511.5 million as of March 2021. Dynex Capital Inc is headquartered in New York, New York.
– Chimera Investment Corp ($NYSE:CIM)
Chimera Investment Corporation is a real estate investment trust that focuses on investing in and managing a portfolio of residential mortgage assets, including agency residential mortgage-backed securities, non-agency residential mortgage-backed securities, and other mortgage-related investments. As of December 31, 2020, the company owned and managed a portfolio of approximately $32.6 billion in residential mortgage assets.
Summary
Investment analysis of Annaly Capital Management indicates the company is bracing for further interest rate increases in 2023. Currently, media sentiment around the company is mostly negative. Investors should consider the potential risks and rewards of investing in Annaly Capital Management, including the potential for increased interest rates, before making any decisions. Annaly Capital Management has a history of prudent financial management and attractive dividend yields that make it attractive to many investors. It is important to assess the company’s financials, including its debt-to-equity ratio and its dividend payout ratio, before investing.
Additionally, investors should be aware of the potential risks involved with investing in Annaly Capital Management, such as changes in macro-economic conditions, changes in interest rates, and the potential for capital losses.
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