Message Font: Serif | Sans-Serif
No. of Recommendations: 12

over the past ten years people who bought NLY when below book have done very well.

I would quibble with this only in that NLY hasn't traded below book often (at all until late).

Starting in 2003, NLY traded in a range from ~1.25 to >1.5X book. At least until the fed tightening inverted the yield cure starting at the end of 2005, and through 2006. At the end of 2005, NLY traded 'at book value' $10.73), but not below. However book continued to drop into 2006, reaching a nadir at the 6/30/2006 report at $9.48/share, but the low in that quarter was $11.57 at 1.22X BV and in the quarter that followed book began to increase and the low was $12.17. In mid 2007, the yield curve returned to normal (uninverted?). As 2007 played out, book mostly improved (3 out of 4 quarters) and NLY traded normally at least 1.3X.

As the financial crisis hit in 2008 and 2009, NLY benefitted from the dropping rates response. Book value improved all but one of those 8 quarters, but at the depth of the crisis, at the end of March 2009, NLY did close the quarter for the first time below book value (95%), but with a value up to $15.6 per share.

However, since the financial crisis, NLY has traded much tighter to book value. Rarely closing a quarter much above 1.2X book and only periodically popping much above that level. So I think it reasonable, given the last 5 years, to consider jumps to 1.2X book as likely near short term highs.

Only in the quarter ending 12/31/2012 has NLY dipped below 90% of BV. I think it likely there now, but we'll see on report. While that could well be opportunistic, it is tempered by noting that BV has mostly been dropping, albeit modestly, since mid 2011. Since I consider dropping values to be a warning sign of investments that could be value traps, I would call it only a cautious opportunity.

Helical Investor

P.S. - Pasted a copy of my spreadsheet that covers this into a google doc.
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.