Jeffrey Gundlach's Current Favorite Pick: Annaly Capital Management

Doubleline Capital Founder Jeffrey Gundlach was interviewed by CNBC at the 2015 Delivering Alpha conference on Wednesday. Gundlach revealed his current favorite pick - Annaly Capital Management, Inc. NLY. Here is what he said about the REIT.

Really Cheap And In Pretty Good Shape

"I actually bought Annaly a couple of weeks ago and I just think it's really cheap," Gundlach said. "And there's a lot of concern about the book value because the second quarter book value has been reported and the interest rates rose. So, while sometimes its trading like a 25 percent discount to book which is really a historically extreme - you have to go back to really horrible environments to see that kind of discount. The book value probably will fall for the second quarter, but I think people are greatly overestimating how much it will fall by.

And so, I think, it's there some safety built into that share price and the yield is 12 percent, even more than 12 percent now and the dividend probably has more earnings power because rates are higher with borrowing costs unchanged."

He continued, "So, if you take my view that the Fed is not going to raise rates, their borrowing cost can stay relatively stable and if rates having elevated, they are reinvesting at a higher rate. So, I think they are in pretty good shape."

The Only Negative

"The only negative about Annaly is they steadfastly refused to buy back shares. Some of the other mortgage REITs are willing to and will buy back shares which will help get that discount to shrink.

Gundlach also revealed that he "likes the idea of Annaly with Puerto Rico as a pair trade."