Any time Standard & Poor decides to bring new stocks into its ecosystem, you can bet the news will make waves in the stock market. And as of September 19, 2022, Annaly Mortgage Management (NLY) will be joining the S&P MidCap 400. Alongside the REIT mortgage company are a few other stocks – Penn Entertainment, PVH, and Dynatrace. However, today, we’re here to talk about whether or not this exciting news is reason enough to buy NLY stock.
NLY, a mortgage real estate investment trust, invests in mortgage-backed securities. If you’re familiar with how REITs operate, you know that this means their income is dependent on interest rates. More specifically, NLY earns income through principal and interest payments from mortgages. For the past decade, mortgage rates have been ultra-low – great for homebuyers, bad for REITs like NLY. And when looking at the company’s stock price over the past 10 years and counting, you can see that things haven’t been easy. In the past 5 years the stock is down just under 50%. In the past year, the stock is down 24%. But, are things starting to shift for Annaly through the news of joining the S&P MidCap index?
This news alone provided a small boost to the stock’s price, sure. The stock is up a modest 2% in the last week. And you can safely assume that when the news becomes official on 9/19, another boost will likely follow. However, what should really pique investors’ interest isn’t necessarily this particular news. We’re more interested in what the federal reserve is going to do – as their actions in the short term could have profound implications on Annaly stock. Inflation rates are soaring – and have been climbing for some time. In order to combat this, the federal reserve may slow down (or stop altogether) the purchasing of mortgage-backed securities.
With Good Timing & Upside Potential, is NLY a Buy Right Now?
Now, it seems as if there is reason to buy NLY stock ahead of what may be to come. After all, the price sits at just $6.57 right now – and could be a great value investment. But, we advocate that investors buy safe, undervalued stocks that are rising in price. Is this necessarily the case for Annaly? To answer this question, we need to introduce you to our stock forecasting system. The VectorVest system rates stocks according to 3 simple metrics: Relative Value (RV), Relative Safety (RS), and Relative Timing (RT). Together, these 3 ratings encompass all other forms of technical and fundamental analysis. They tell you everything you need to know about a stock to make safe, accurate, and emotionless decisions.
Based on the combined VST rating, our system offers a clear buy, sell, or hold rating for any given stock. So – what’s the VectorVest system showing for Annaly? First, let’s talk about the RV rating of 1.17 – which is good on a scale of 0.00-2.00. This shows that NLY has an above-average price appreciation potential. This is coupled with a good forecasted earnings growth rate of 8%. And, our system also indicates that NLY has good timing right now with an RT of 1.20. This means a positive price trend has formed and should continue pushing the price up. As this figure gravitates in the opposite direction – back towards 1.00 and below – it will mean that this trend has lost momentum, so it’s important to stay up on the RT rating of your investments.
The main issue with NLY is its risk level. With an RS rating of 0.73, this stock has poor safety. This is calculated based on the consistency and predictability of a company’s financial performance and business longevity. Moreover, the stock has a poor comfort index (CI) of just 0.66. This suggests an inability to withstand long-term or severe price declines.
Now – taking all this into account, Annaly has a fair VST rating of 1.06. What does this mean for you as an investor, though? Should you buy it now? To find out, get a free stock analysis here.
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VectorVest advocates buying safe, undervalued stocks, rising in price. As for Annaly, it has good upside potential and a positive price trend, but poor safety.
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