1 mREIT's Secret Purchase... Revealed!

The CIO of American Capital Agency and American Capital Mortgage has taken a stake in Hatteras Financial

Feb 11, 2014 at 12:59PM


Source: KDS444

When American Capital Agency (NASDAQ:AGNC) and American Capital Mortgage (NASDAQ:MTGE) reported earnings recently, the fact that both mortgage REITs revealed earnings-per-share losses was lost in the shuffle surrounding some astounding news.

On the agency mREIT's conference call, Chief Investment Officer Gary Kain disclosed he had been investing in the stocks of his agency-only peers, which he considered a better use of investors' money while the sector's share prices were low. This investment strategy was reiterated on the American Capital Mortgage call, as well.

At the time, Kain had declined to reveal which mREITs had caught his fancy. A recent SEC filing has put part of the mystery to rest, however. Hatteras Financial (NYSE:HTS), a trust with a market cap of less than one-quarter of that of American Capital Agency, is one recipient of Kain's investment attention. Together, both of the mREITs under Kain's control purchased 8.5% of Hatteras' stock, with the smaller American Capital Mortgage appearing to have purchased only around 1%.

A vote of confidence?
As Kain noted in both conference calls, purchasing the stock of rivals at a 20% discount just made good business sense. The news certainly hasn't hurt Hatteras' stock price, which has managed to stay well above the $18 mark this month – something it hadn't been able to manage for some time.

Though Kain has stumbled a bit in the past year, there is little doubt the man knows his business, and quickly moved to repurchase stock after the disastrous secondary offering by his agency-only trust early last year. It seems safe to say, therefore, that his purchases of Hatteras' stock may be considered a show of faith in that mREIT's ability to survive – and thrive.

Kain is taking steps to bolster his own companies in other ways, too. With analyst curiosity regarding the peer-related stock purchases somewhat sated on the American Capital Agency call, time was spent during the American Capital Mortgage earnings call discussing another new purchase: Residential Credit Solutions.

With the RCS acquisition finalized, American Capital Mortgage is set to become a real player in the mortgage servicing arena, with RCS now servicing approximately $10 billion in loans. The company came with full licensure and a working history with Fannie Mae and Freddie Mac, and Kain notes the company plans to purchase more mortgage servicing rights – which, as he commented, are a great interest rate hedge.

As far as the identities of the other mREITs whose stock Kain purchased are concerned, chances are good the information will come to light soon. Interestingly, on the very day the SEC document regarding the Hatteras stock purchases was filed, that company saw trading activity increase nine-fold – and the price has been on an upward climb ever since. For the beneficiaries of Kain's investment dollars, this new strategy certainly looks like a winner.

The best high-yielding stocks are only a click away
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Amanda Alix has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.

Compare Brokers