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Here's Why You Should Snap Up Annaly's (NLY) Stock Right Away

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Annaly Capital Management, Inc. (NLY - Free Report) not only witnessed year-over-year growth in 2020 core earnings, excluding PAA, in the third quarter but has also been witnessing upward estimate revisions, reflecting analysts' optimism about its prospects. Notably, the Zacks Consensus Estimate for its 2020 earnings has improved 3.6% over the past month.

Shares of this Zacks Rank #2 (Buy) company have declined 10.4% over the past year, which is narrower than the industry’s fall of 22.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


Annaly has a Momentum Score of B. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best investment opportunities for investors.

Notably, the company has a number of other aspects that make it a solid investment choice.

Prudent Investment Allocation Strategy: Annaly’s investment strategy is driven by a prudent selection of assets and effective allocation of capital to achieve better returns. The company’s investment strategy involves traditional Agency mortgage-backed securities (MBS) as well as investments in more credit-focused asset classes.

Further, during the third quarter, the company continued to shift its investment portfolio to low-coupon TBA securities and specified pools that have compelling prepayment characteristics. Such timely steps taken in the early market-recovery phase positioned its investment portfolio well to capitalize on opportunities.

Declining Cost: Annaly continues to gain from scale and diversification, and operates at a substantially lower expense level. In fact, a reduction in repo costs resulted in a decline in interest expenses, driving net interest margin expansion in the third quarter. Hence, with the Fed and other central banks advocating a low interest rate environment, Annaly is well-positioned to further capitalize on operating in a lower cost market environment, given its strong relationships with best-in-class sponsors and operating partners.

Favorable ROE: Annaly’s return on equity is 13.3% compared with the industry’s average of 8.9%. This reflects that the company reinvests its funds more efficiently.

Lower leverage: Furthermore, its low leverage as compared to the industry makes it a safe bet. It has a total debt to total equity ratio of 0.49, lower than the industry’s average of 149. This reflects that it has a lower debt burden relative to its peers and will likely be able to fare well even in a dynamic business environment.In fact, its economic leverage on Sep 30 was 6.2X, declining from 6.4X as of Jun 30, 2020. Hence, with a decent balance sheet, the company is well-equipped to support its business, even in times of economic stress and market volatility.

Other Stocks to Consider

AGNC Investment Corp.’s (AGNC - Free Report) Zacks Consensus Estimate for 2020 earnings has been revised 11.3% upward to $2.60 over the past month. The company currently carries a Zacks Rank of 2.

Starwood Property Trust, Inc.’s (STWD - Free Report) earnings estimates for the ongoing year have been revised 2.6% upward to $1.97 over the past two months. The company currently carries a Zacks Rank of 2.

Two Harbors Investments Corp’s (TWO - Free Report) earnings estimates for 2020 have been revised 15% upward to 69 cents over the past two months. It currently carries a Zacks Rank of 2.

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