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Here's Why You Should Retain AGNC Investment (AGNC) Now

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AGNC Investment Corp.’s (AGNC - Free Report) active portfolio-management strategy will help it navigate the current monetary policy transition. However, market conditions are likely to remain challenging in the near term, with monetary policy tightening, whereas spread widening may affect book value.

AGNC is operating in a more defensive position with significant hedge protection due to market volatility. AGNC repositioned certain credit-focused holdings, trimmed its non-agency portfolio and increased exposure to higher-coupon holdings. Such prudent asset-selection efforts might offer greater stability of cash flows and bode well for long-term growth.

Over the recent quarters, the company has made pronounced efforts to reposition its portfolio to offset risks related to interest rates and prepayment uncertainty. During first-half 2024, the company maintained a significant interest rate hedge position, which covered 98% of the outstanding balance of its Investment Securities Repo, TBA position and other debt as of Jun 30, 2024.

The company enjoys a decent financial position. It has solid access to attractive funding across a broad spectrum of counterparties and financing conditions. As a result, it has flexibility in the opportunistic enhancement of its portfolio. AGNC Investment’s liquidity as of Jun 30, 2024, including cash and unencumbered Agency assets, was $5.3 billion. 

Operating at a conservative leverage level, in anticipation of any spread widening, will enable the company to deploy capital in investment opportunities in the upcoming period. Lastly, with significant repurchase agreements outstanding used to fund investment portfolios, the company seems to be less susceptible to undergoing a credit crisis in the near term.

Operating performances of mREITs depend on conditions prevalent in the broader financial markets and the macroeconomic situation. Any volatility in the mortgage market, unfavorable change in the shape of the yield curve, interest-rate volatility and the deterioration of generic financial conditions might affect the performance of the company's investments.

AGNC Investment continues to adjust its investment portfolio in sync with the current interest rate and global economic environment. With the Fed reducing its Agency RMBS portfolio and higher volatility, the company trimmed its investment portfolio. As it prioritizes risk and liquidity management by reducing leverage over incremental returns amid challenging market conditions, robust returns are expected to remain elusive, at least in the short term.

Analysts are not optimistic regarding AGNC’s earnings growth potential. In the past 30 days, the Zacks Consensus Estimate for the company’s 2024 earnings has been revised downward. 

Currently, AGNC carries a Zacks Rank #3 (Hold). The company’s shares have gained 13.6% in the past six months compared with a 3.1% rise recorded by the industry.

Zacks Investment ResearchImage Source: Zacks Investment Research

Stocks Worth Considering

Some other top-ranked finance stocks are NatWest Group plc (NWG - Free Report) and BNP Paribas SA (BNPQY - Free Report) , each sporting a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NatWest Group’s earnings estimates for 2024 have been revised 7.1% upward in the past 30 days. NWG’s shares have gained 49.6% over the past six months.

BNP Paribas’s 2024 earnings estimates have revised by 1% in the past 30 days. BNPQY’s shares have gained 8.2% over the past six months.


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