– Third largest mortgage REIT behind $NLY and $STWD.
– Bet on rising interest rates and widening MBS spreads with subsequent reduction in book values of mortgage REITs.
– This is expected to lead to a capital raise or dividend cut for AGNC.
Valuation: 75bps interest rate hike and MBS spreads expanding to 1.5% are expected to lead to a 35% decline in book value and a 25% downside in the stock.
Exp. gain: 25% to $8/share.
Full $AGNC write-up (free guest account required):