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Share Name | Share Symbol | Market | Type |
---|---|---|---|
AGNC Investment Corporation | NASDAQ:AGNC | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.07 | 0.68% | 10.44 | 10.42 | 10.44 | 162,337 | 13:42:05 |
The earnings "beat ratio" was 73.4% while the revenue "beat ratio" was 51.9%. Total earnings for this sector were up 7.7%, slightly moderating from the 10.0% growth in the fourth quarter of 2012. Total revenues moved north 5.5% in the quarter verses 23.1% growth in the prior quarter.
Looking at the consensus earnings expectations for the rest of the year, we remain encouraged since earnings are expected to grow 19.1% in the second quarter, 7.6% in the third quarter and 27.6% in the fourth quarter, thereby registering full-year 2013 growth of 14.0%.
OPPORTUNITIES
Retail REITs: Being a leader, the U.S. retail industry provides adequate growth prospects for these REITs. Despite the rise in online shopping through the Internet, mobile phones and tablets, it is the physical interaction that the millennial generation stills prefers while shopping. Hence, amid the technological advancements, in order to increase their market dominance, the retail industry keeps on reinventing, redesigning and revamping their physical stores.
With retail properties in premium locations, companies like Kimco Realty Corporation (KIM), The Macerich Company (MAC) and Acadia Realty Trust
(AKR) remain our primary choiceS.
Healthcare REIT: Relatively immune to the macroeconomic problems, these REITs are expected to benefit from rising national health expenditures that are projected to grow 3.8% in 2013 and 7.4% in 2014, according to Centers for Medicare and Medicaid Services. Also, the federal agency projects average compounded annual growth rate of health expenditures of 6.2% over 2015 through 2021.
Moreover, though the forthcoming wave of retiring baby boomers is often cited as a threat to the U.S. economy, this is a boon for the healthcare sector as senior citizens spend 200% more than the average population.
Hence, we believe that Healthcare REITs like HCP Inc. (HCP), Health Care REIT, Inc. (HCN) and Healthcare Realty Trust Inc. (HR) can capitalize on this trend.
Industrial/Storage REITs: With a larger customer base, rise in e-Commerce application and supply chain consolidation, the demand for logistics infrastructure and efficient distribution networks have risen.
This has lead to a rising need for industrial/storage facilities and the stocks to consider include Extra Space Storage Inc. (EXR), DCT Industrial Trust Inc. (DCT) and CubeSmart (CUBE).
Lodging/Resorts REITs: With the improving U.S. business and strong international travel and tourism volumes, the lodging sector is expected to continue with its recovery. Particularly, the North America market is anticipated to significantly benefit with limited supply and rising demands.
Stocks that worth a look include are Sunstone Hotel Investors Inc. (SHO), Diamondrock Hospitality Co. (DRH) and Host Hotels & Resorts Inc. (HST).
Apartment REITs: With the lack of stability in the job market along with mounting student debt, the home ownership in the under-35 age cohort continues to decline. Since renting has emerged as the only viable option for customers who cannot avail mortgage loans or are unwilling to buy a house at present, we expect the apartment sector to remain comparatively steady in the coming quarters.
We favor stocks like Select Income REIT (SIR), Apartment Investment & Management Co. (AIV) and Equity Residential (TM).
WEAKNESSES
For the sector as a whole, rising interest rates are a looming concern. High capital costs erode their profit level and hence trigger a fall in the dividend yield that the investors primarily look for while investing in REIT stocks. Considering individual segments, we believe that the current macroeconomic environment remains a menace for the following sectors.
Mortgage REITs: In the past couple of years, with low short-term rates and quantitative easing policies (QE), mREITs have benefited from lower borrowing costs, leading to higher yields (they invest in mortgage backed securities and use short-term debt for financing their purchases making money from the spread).
Amid the increasing yields on the U.S. Treasury 10-year note and apprehensions that the Fed will soon pull out its QE program, mREITs stocks are continuing to lose their shine. Subsequently, the FTSE NAREIT Mortgage REITs total returns dropped 17.25% from the beginning of the second quarter till Jun 20, 2013.
In the recent past, mREITs like American Capital Agency Corp. (AGNC) and American Capital Mortgage Investment Corp. (MTGE) slashed their dividends. The other stocks that we would like to avoid are Hatteras Financial Corp. (HTS) and Newcastle Investment Corp. (NCT).
Another division which may underperform is the Office REIT. With the U.S. economy still registering sluggish growth, the demand for office properties, particularly in the suburban market still lacks luster. As such, companies like Mack-Cali Realty Corp. (CLI) have started to trim their office properties and diversify into the relatively stable multifamily apartment sector.
Conclusion
The macroeconomic issues and the political situation have been affecting the market, but we believe that with the economic recovery gaining momentum, rents and occupancies would improve further. Moving forward, limited supply of new construction coupled with the growing demand for premium properties bode well for the REITs, in particular for those that have assets in high barriers-to-entry markets.
AMER CAP AGENCY (AGNC): Free Stock Analysis Report
APARTMENT INVT (AIV): Free Stock Analysis Report
ACADIA RLTY TR (AKR): Free Stock Analysis Report
MACK CALI CORP (CLI): Free Stock Analysis Report
CUBESMART (CUBE): Free Stock Analysis Report
DCT INDUSTRIAL (DCT): Free Stock Analysis Report
DIAMONDROCK HOS (DRH): Free Stock Analysis Report
EQUITY RESIDENT (EQR): Free Stock Analysis Report
EXTRA SPACE STG (EXR): Free Stock Analysis Report
HEALTH CR REIT (HCN): Free Stock Analysis Report
HCP INC (HCP): Free Stock Analysis Report
HEALTHCARE RLTY (HR): Free Stock Analysis Report
HOST HOTEL&RSRT (HST): Free Stock Analysis Report
HATTERAS FIN CP (HTS): Free Stock Analysis Report
KIMCO REALTY CO (KIM): Free Stock Analysis Report
MACERICH CO (MAC): Free Stock Analysis Report
AMER CAP MTGE (MTGE): Free Stock Analysis Report
NEWCASTLE INV (NCT): Free Stock Analysis Report
SUNSTONE HOTEL (SHO): Free Stock Analysis Report
SELECT INCOME (SIR): Free Stock Analysis Report
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