We recently published a list of 10 Most Undervalued REIT Stocks to Invest In Now. In this article, we are going to take a look at where AGNC Investment Corp. (NASDAQ:AGNC) stands against other most undervalued REIT stocks to invest in now.
Where is the Real Estate Sector Heading?
According to the National Association of Realtors, sales of previously owned homes in February increased 4.2% from January while they were 1.2% lower year-over-year. Home buyers are slowly moving into the market although mortgage rates have not changed much. Although the market is still tight, it is witnessing more inventory and choices, with the inventory at February end standing at 1.24 million units thereby representing a 17% rise year-over-year. The tight supply is still driving home prices up since the median price of a home sold in the month of February was 3.8% higher, as compared to last year.
Lawrence Yun, NAR’s chief economist, previously appeared on CNBC to give insights on the state of the housing market. In his opinion, if inflation comes down due to deregulation policies despite the tariff conditions or more home construction occurs with the federal government opening up for more development, the market might see lower mortgage rates along with the Fed rate cut. Simultaneously, the Federal Reserve decided to hold the interest rates steady amidst uncertainties around tariffs.
Logan Mohtashami, HousingWire lead analyst, thinks the cure for tariffs is lower mortgage rates. In an interview with CNBC, he said that if mortgage rates go down and new home sales start to grow, the builder would find a way to sell homes and build homes. Although builder sentiment has recently fallen considering their profit margins are stressed amidst tariffs, this sentiment tends to increase with rates going down.
Our Methodology
In order to compile a list of the 10 most undervalued REIT stocks to invest in now, we first used a stock screener to shortlist REIT stocks trading at a forward P/E of less than 15, as of March 25. From this list, we selected the top 10 stocks with the highest number of hedge fund holders, as of Q4 2024. The 10 most undervalued REIT stocks to invest in now have been arranged in ascending order of the number of hedge funds that disclosed stakes in them at the end of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An accountant holding a calculator and paperwork, representing the complex financial regulations the company must manage.
AGNC Investment Corp. (NASDAQ:AGNC)
Number of Hedge Fund Holders: 18
Forward P/E: 6.36
AGNC Investment Corp. (NASDAQ:AGNC) is an internally managed mortgage REIT founded in 2008. The firm is a leading investor in Agency residential mortgage-backed securities (Agency MBS) which are guaranteed by a US government-sponsored enterprise. It also invests in other mortgage and mortgage-related securities including non-Agency residential and commercial MBS, credit risk transfer securities, and assets related to the housing, mortgage, or real estate markets not guaranteed by a government agency.
AGNC Investment Corp. (NASDAQ:AGNC) focuses on Agency MBS which has government support, substantial yield opportunity, and a highly liquid market to offer. Hence, the REIT provides a liquid and efficient way to gain exposure to this impactful asset class. While interest rate volatility eased amidst an accommodative monetary policy during 2024, the REIT generated a positive economic return of 13.2% in the year thereby showing its ability to generate strong investment returns in environments where Agency MBS spreads tend to be wide and stable. In the view of management, the favorable environment for Agency MBS will persist in the current year.
Investors should also note that the company’s dividend-driven total stock return since its IPO in 2008 has surpassed those of comparable indices and other yield-oriented alternatives. With more than $13 billion of common stock dividends paid since inception, AGNC Investment Corp. (NASDAQ:AGNC) is a source of substantial monthly dividend income.
Overall, AGNC ranks 6th on our list of most undervalued REIT stocks to invest in now. While we acknowledge the potential of AGNC as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than AGNC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
