ANH Watch

Anworth Mortgage Asset Corp. (ANH) invests in mortgage-backed securities (a dirty word these days) issued by quasi-governmental agencies (which cleans it up a bit), such as Fannie Mae (FNM), Freddie Mac (FRE) and Ginnie Mae.

More to the point, ANH goes ex-dividend on its quarterly payout on July 7 (that's tomorrow), and the amount is a whopping 13.81% annualized.

	trend	adx	psar	pps	macd	macd trend	sto	sto trend
$7.35

ANH fared better than many mortgage investors during the recent collapse. It has been in a downtrend since July 2003, true, but it has lost just a bit more than half its value since then, and since the February 2008 peak, when the extent of the mortgage mess was becoming clear, has only lost 29%.

Compare that to FNM and FRE, which fell to pennies from levels that exceeded $60 in 2007.

So any trader must ask, if Fannie and Freddie are on the ropes, why in the world should ANH be trusted? I don't have an answer, but it does increase my sense of risk.

ANH cut its dividend on June 30, so that disruption is behind it. That's no guarantee, of course, that further dividend cuts aren't ahead.

Near-term, ANH has been in a gentle uptrend, with higher volume Thursday and Friday of last week, and with the parabolic sar and Person's Proprietary Signal moving to bull phase this morning.

So by the short-term rules, the stock invites entry on the bull side. The same is true on the long-term monthly chart: ANH closed June above the 12-month moving average, an entry signal by my rules.

Now, let's get negative.

• Liquidity is OK, but not spectacular.
• Volume is generally above 1 million shares a day, but I feel more secure with volume of 5 million plus.
• Analysts are not hugely positive about the stock: Earnings estimates are stable, not growing.
• Historical earnings have had a slight downward bias since the third quarter of 2009.

So this would be a dividend play, pure and simple, with the hope that the price would recover quickly from the ex-div hit that all high-dividend stocks endure.

Reversal Levels

• $7.37, +0.3%
• $7.35 <== You are here.
• $1.03, -4.4%

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The Great Reflation: How Investors Can Profit From the New World of Money
OK. The credit bubble burst. Housing, burst. Shockwaves reverberated. Markets collapsed. What lies ahead as we reemerge from the wreckage.

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Disclaimer

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Abbreviations:

• psar - Parabolic Stop and Reverse
• adx - Average Directional Index
• pps - Person's Proprietary Signal
• ma20 - 20-day moving average
• macd - Moving Average Convergence-Divergence
• sto - Fast Stochastic

About the glance: The colors indicate the state of each signal.

• trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
• adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
• psar, pps, macd: green for bull mode, red for bear
• sto: green for overbought, red for oversold, yellow for the neutral zone.