Perfect time to start accumulating REITs? (AGNC, CIM, HTS)

One of the most important gifts Warren Buffet has given the investing world is a single maxim: "Be fearful when others are greedy and greedy when others are fearful." Unfortunately, all too many of us think we're smarter than one of the most successful investors of all time and we do exactly the opposite of what he advises (and I'll readily admit that I've been guilty of it, too). Buffet's words have been echoing in my head as I look at the outlandish yields on some popular real estate investment trusts (REITs): American Capital Agency Corp.

, which invests in "residential mortgage pass-through securities", is yielding 18+ percent. Chimera Investment Corporation

, which invests in residential mortgage-backed securities (

) and loans, is yielding 17+ percent and Hatteras Financial Corp.

, which invests in "adjustable-rate and hybrid adjustable-rate single-family residential mortgage pass-through securities," is yielding 13+ percent. What do they all share? The specter of some words that have spooked investors: mortgage-backed securities, adjustable-rate mortgages and pass-through securities. Couple that with fears over a prolonged recovery for the housing market and you seem to have exactly the right investing climate that Buffet describes: one where investors are fearful. Indeed, analysts don't expect a full housing recovery until 2014, and the general population thinks it'll be more like 2015 according to a recent survey by Harris Interactive. But, the good news is a REIT must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends. If the REIT's making money, you're entitled to that income, too, no matter what the broader market is doing. While we can't be sure AGNC, CIM and HTS will weather any further declines in the housing and commercial real estate markets moving forward, we can be sure that with yields well over 10 percent (and closer to 20 percent) investors seem to have unfairly punished the stocks. And that's a sign it might be a time for us to get greedy.