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 Annaly Capital Management, Inc. (NYSE:NLY) 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 aerial view of a residential neighbourhood, its mortgage finance investments having a positive effect on the economy.
Annaly Capital Management, Inc. (NYSE:NLY)
Number of Hedge Fund Holders: 18
Forward P/E: 7.69
Annaly Capital Management, Inc. (NYSE:NLY) is a diversified capital manager that engages in the mortgage finance business. The firm’s portfolio includes securities, loans, and equity in the mortgage finance market. The REIT is a proven industry leader across the residential mortgage finance market with a scale 10x the size of the median mortgage REIT by market capitalization.
Annaly Capital Management, Inc. (NYSE:NLY) is utilizing a differentiated investing model comprising diversified investment strategies including agency mortgage-backed securities, mortgage servicing rights, and residential real estate. The REIT generated an economic return of 11.9% in 2024 driven by strong performance from each of these three investment strategies. While the Agency portfolio grew by nearly $5 billion through 2024, Residential Credit portfolio increased 17% year-over-year and the Mortgage Servicing Rights (MSR) portfolio grew by 24% year-over-year. Regarding the reiterated favorable dynamics for these businesses in 2025, David Finkelstein, the firm’s Chief Executive Officer, said:
“Agency MBS continues to provide attractive returns while an improved supply and demand picture, decreasing financing costs and a steeper yield curve are additional sector tailwinds. Meanwhile, our Residential Credit and MSR portfolios are well-positioned for further growth given Annaly’s deep capital base and strategic relationships with originators. As always, we remain prepared for continued volatility given our low leverage, ample liquidity and dynamic hedging and portfolio management.”
Overall, NLY ranks 8th on our list of most undervalued REIT stocks to invest in now. While we acknowledge the potential of NLY 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 NLY 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.
