American Capital Agency Corp. Gets the Green Light From David Einhorn

Greenlight Capital’s chief takes a sizeable stake in the mREIT, as well as a smaller one in Hatteras Financial Corp.

May 23, 2014 at 10:21AM

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. (NASDAQ:AGNC), 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.

Other juicy dividend stocks to consider
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends Athenahealth. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information