We’re closing in on the end of 2025 at record-shattering levels for the S&P 500, and it’s not a time for complacency. In my view, now is a time for active portfolio management, and investors have to take tremendous care to ensure that ourWith combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular cont ...

Core Insights - AGNC Investment Corp. is adopting a proactive and defensive portfolio management strategy aimed at long-term growth by frequently adjusting asset allocations and hedging strategies to mitigate risks while seizing yield opportunities [1] Portfolio Management - The company has maintained a robust hedge position, covering 91% of its Investment Securities Repo, TBA positions, and other debt as of March 31, 2025, indicating a strong focus on protecting against interest rate volatility [2] - AGNC has strategically reduced its exposure to more volatile non-agency mortgage-backed securities (MBS) and shifted towards higher-coupon Agency MBS, which enhances prepayment probability and supports better cash flow visibility [3] Market Positioning - With spreads between Agency MBS and benchmarks reaching near-pandemic highs in early April 2025, AGNC's $77.9 billion Agency MBS portfolio is well-positioned for compelling forward returns, particularly on a leveraged basis, as these securities are backed by Government-Sponsored Enterprises (GSEs) [4] - Despite potential fluctuations in short-term earnings due to market volatility, AGNC's disciplined active management and defensive positioning provide a solid foundation for long-term growth [5] Competitive Landscape - AGNC competes with Annaly Capital Management (NLY) and Starwood Property Trust (STWD) within the mortgage REITs industry, with differing investment approaches among the companies [6] - Annaly pursues a diversified strategy combining traditional Agency MBS with non-agency and credit-sensitive assets, focusing on acquiring newly originated mortgage servicing rights (MSRs) to enhance returns [7] - Starwood focuses primarily on commercial real estate, including commercial mortgage-backed securities (CMBS) and real estate debt investments, maintaining steady income through principal repayments and targeted acquisitions [8] Performance Metrics - AGNC shares have gained 6.4% year to date, outperforming the industry's growth of 2.8% [9] - The company trades at a forward price-to-tangible book ratio of 1.08X, above the industry's average of 0.96X [13] - The Zacks Consensus Estimate for AGNC's 2025 and 2026 earnings implies year-over-year declines of 11.2% and 3.9%, respectively, with estimates remaining unchanged over the past 30 days [15]

Financial Data and Key Metrics Changes - The company reported Q4 revenue of $8.9 billion, representing a 5.4% organic growth year-over-year, with adjusted EPS of $1.62, up 11% [46][50]. - For the full fiscal year 2025, revenue grew 5% organically, and EPS increased by 6% or 10% on a constant currency basis [50][56]. - The adjusted gross margin was 65.1%, down 70 basis points year-over-year, while the adjusted operating margin increased by 90 basis points to 27.8% [47][49]. Business Line Data and Key Metrics Changes - The cardiovascular portfolio grew 8%, with nearly 30% growth in cardiac ablation solutions [4][5]. - Neuromodulation and diabetes segments delivered double-digit growth, while cranial and spinal technologies saw high single-digit growth in the U.S. [5][24]. - The diabetes business grew 12%, marking the sixth consecutive quarter of double-digit growth [24][27]. Market Data and Key Metrics Changes - U.S. revenue growth was 5%, the strongest quarterly growth in 15 quarters, with Japan growing high single digits and Western Europe and emerging markets growing mid-single digits [46][47]. - The company noted strong growth in India, Southeast Asia, and Eastern Europe [47]. Company Strategy and Development Direction - The company announced plans to separate its diabetes business into a standalone public company, which is expected to enhance focus on high-margin growth markets [28][29]. - The strategy aims to increase investments in core businesses with higher margins, allowing for improved capital allocation and growth potential [30][41]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying fundamentals of the business, indicating that growth drivers are gaining momentum [58][60]. - The company expects to continue delivering mid-single-digit organic revenue growth and return to high single-digit EPS growth in fiscal year 2027 following the diabetes separation [56][59]. Other Important Information - The company plans to increase R&D investments for the first time in four years, aiming to grow R&D faster than revenue [52][54]. - The adjusted tax rate is expected to rise from 16.7% to about 18% due to changes in tax regulations [54][91]. Q&A Session Summary Question: Guidance philosophy with the new CFO - Management is optimistic about growth drivers, with markets growing 7% even without diabetes, and expects strong positions in key markets [86][87]. Question: Clarification on EPS growth expectations - EPS growth is expected to be high single digits in fiscal year 2027, even without the benefits from the diabetes separation, as growth drivers remain strong [98][99]. Question: Impact of tariffs and diabetes business on margins - The impact of tariffs is estimated to be between $200 million to $350 million, affecting gross margins, while the rollout of new diabetes products is expected to pressure margins initially [105][106].

Group 1 - The current market environment is characterized by high volatility, creating a strong incentive for investors to actively manage their portfolios [1] - To outperform the stock markets, investors should consider overlooked stocks, especially in the small and mid-cap sectors [1] Group 2 - Gary Alexander has extensive experience in covering technology companies and advising startups, contributing to his insights on industry trends [2] - He has been a contributor to Seeking Alpha since 2017 and his work is featured in popular trading apps like Robinhood [2]