Is AGNC Investment a Buy?
The past 18 months have been extraordinarily difficult for companies in the mortgage market. As the Federal Reserve hiked interest rates to defeat inflation, mortgage bankers saw origination volume collapse and mortgage real estate investment trusts (mREITs) saw the values of their holdings erode. Now that the worst appears to be over, is AGNC Investment (NASDAQ: AGNC) worthy of a buy?
Mortgage REITs are different from typical REITs, which invest in properties and lease them out to tenants. Mortgage REITs don't buy properties; they buy property debt. Instead of collecting rent, they collect interest on mortgage-backed securities (MBS).
AGNC Investment is a mortgage REIT that focuses almost entirely on MBS that are guaranteed by the U.S. government. If you recently bought a house and used a mortgage backed by the Federal Housing Administration or by Fannie Mae/Freddie Mac, chances are it ended up in a mortgage-backed security that might be held by an mREIT like AGNC Investment. These securities have no credit risk, but they have a lot of interest rate risk, and that was the problem for mortgage REITs last year.
Source Fool.com
