Here’s a look at three fallen angels trading near their 52-week lows that could be worth buying.
Holy yield, Batman!
I’ve been waiting for a moderate pullback in mortgage-REIT American Capital Agency Corp. (NASDAQ:AGNC) for better than a year, and last week we finally got it!
American Capital Agency Corp. (NASDAQ:AGNC) buys agency- (i.e., U.S. government-) backed mortgage-backed securities and makes money by levering its portfolio as much as is reasonable to take advantage of the net interest margin between what it borrows at and what it lends at. In recent months, these interest spreads for the two largest agency-backed mREITs, Annaly Capital Management, Inc. (NYSE:NLY) and American Capital, have been shrinking due to the Fed’s ongoing bond-buying activity, which is removing many MBS’ buying opportunities from the marketplace. In addition, as my Foolish colleague David Hanson pointed out last week, American Capital reported a comprehensive loss of $557 million, meaning its market securities lost value in the first quarter. In short, mREITs aren’t without their fair share of risks.
While that certainly isn’t positive news, I’d say investors are casting doubt on mREITs like Annaly Capital Management, Inc. (NYSE:NLY) and American Capital Agency Corp. (NASDAQ:AGNC) at precisely the time when they’re about the hit another sweet spot of growth. As the Fed has hinted, when it begins to wind down its bond-buying program, more lucrative MBS-purchasing opportunities will open up, which should help expand net interest margin. In addition, a very accommodative Fed should keep lending rates near or at record lows through 2015. This high level of visibility will work in favor of Annaly Capital Management, Inc. (NYSE:NLY) and American Capital Agency Corp. (NASDAQ:AGNC), which have levered their portfolios to take advantage of this upcoming “sweet spot.”
While I’m certain the company’s 16% yield won’t last forever, I’d be shocked to see it fall below 10% in the next three years.
Big data, big opportunity
Much as I have with American Capital Agency Corp. (NASDAQ:AGNC), I’ve been waiting for data analysis software provider Tibco Software Inc. (NASDAQ:TIBX) to pull back for a while — and now looks like the perfect opportunity to pounce.
In TIBCO’s most recent quarter it delivered 5% revenue growth to $238 million as net income fell 54% from the year-ago period, missing the Street’s estimates. This wasn’t much different from Oracle Corporation (NASDAQ:ORCL), which sank after it reported its results in March, also failing to meet expectations. For Oracle Corporation (NASDAQ:ORCL), hardware revenue sank (which is really nothing new), but software license revenue, which comprises cloud computing, also fell by 2% in a surprise drop to investors.
While not encouraging, the weakness in sales and profit for both companies appears to be based on the transition to cloud-based licensing platforms. Instead of locking in one-time deals and boosting earnings now, companies like Tibco Software Inc. (NASDAQ:TIBX) and Oracle Corporation (NASDAQ:ORCL) are trying to lock up recurring revenue streams. Make no mistake about it, big data spending is going to be gigantic by the end of the decade and Tibco Software Inc. (NASDAQ:TIBX) data analysis tools look poised to capitalize. With a handful of reasons to like the company and an incredible CEO at the helm in Vivek Ranadive, I see no reason why I wouldn’t make a CAPScall of outperform here.
A simple numbers game
For hospital operators like Select Medical Holdings Corporation (NYSE:SEM), the future is just a numbers game as long as the Patient Protection and Affordable Care Act gets implemented on Jan. 1, 2014.
