David Einhorn, manager of Greenlight Capital, has given the nod to a particular corner of the agency-only mortgage REIT sector: American Capital Agency Corp. (AGNC -1.28%), as well as that company's newest investment, Hatteras Financial Corp. (NYSE: HTS).

The hedge fund's most recent 13F filing with the Securities and Exchange Commission revealed the new positions, even as Einhorn and other prominent investors chatter about a coming technology bubble – and Einhorn himself has disclosed that his fund has shorted some of these stocks recently due to concern about when that bubble may pop. 

Mortgage REITs not so bubbly any more
Only two years ago, Einhorn was not a big fan of mREITs, noting that the sector was gutting dividends even as they traded at a premium. As mortgage REIT investors will recall, this was just about one year before "taper terror" knocked the stuffing out of the mREIT industry. 

Obviously, Einhorn is singing a different tune these days, and his big move into American Capital Agency shows a real sea change in attitude. Greenlight purchased more than 5 million common shares of the trust, as well as 400,000 common shares of Hatteras.

Einhorn must consider CIO Gary Kain to be on the right track – especially when it comes to investing American Capital Agency's own money in the stocks of other mREITs, such as Hatteras. No doubt he was impressed by the hefty profit made with this new investment system: a first-quarter profit of $50 million, on an investment of $400 million.

A real show of faith
Does this mean that the hedge fund head honcho believes that mREITs – at least, these two particular trusts – are on their way up? It would certainly seem so, and so far, he is right. Einhorn paid between $19.13 and $22.66 per share for American Capital Agency, and $16.34 and $19.85 for Hatteras; the former closed at $23.34 on May 21, and the latter was up to $20.11 at the close of that same day. 

It is very likely that this show of faith in these companies will help give the entire sector a boost. Einhorn is fairly influential – when, earlier this month, he called Athenahealth a "bubble" stock ready to lose most of its value, the shares tumbled more than 11%. 

As for American Capital Agency, Einhorn's investment is a feather in the cap of Gary Kain and a validation of his somewhat maverick style of management – which, so far, has created the second-largest mortgage REIT in a very short span of time, with generally savory results for its investors.