AGNC Investment: I Am Buying This 14% Yield Hand Over Fist (Rating Upgrade)

Core Viewpoint - AGNC Investment Corp. is showing a positive trend in net interest income, supported by cooling inflation and potential interest rate cuts by the central bank, which could lead to double-digit returns for mortgage trusts [1][2][10] Group 1: Financial Performance - AGNC Investment's net interest income was negative at $3 million in Q2 2024, but this represents an improvement from a loss of$ 69 million in the same period last year, indicating a positive trend [5] - The company's net book value as of June 30, 2024, was $8.40, reflecting a 5% QoQ drop, marking the largest decline since Q3 2023 [7] - The stock is currently trading at a 9% premium to book value, which is higher than the 1% premium for Annaly Capital Management, suggesting a potential for multiple decompression as interest rates decrease [8] Group 2: Market Conditions - The CPI report indicates that inflation cooled to 3.0% in June from 3.5% in March, increasing the likelihood of a near-term rate cut by the central bank, which would benefit mortgage real estate investment trusts like AGNC [4] - AGNC Investment's portfolio primarily consists of 30-year fixed-rate mortgages valued at$ 65.0 billion as of June 30, 2024, an increase of $2.8 billion QoQ [3] Group 3: Investment Outlook - The company is expected to benefit from lower short-term funding rates and cooling inflation, which should enhance its net interest margin moving forward [4][10] - The outlook for profit growth is improving, with expectations that AGNC Investment could soon return to positive net interest income, supported by lower borrowing costs [10]