I explain in this article what elements and analysis lead me to the conclusion that CMO's book value could be down over 20% in Q2, putting its current stock price at a premium of 12% above BV and making it fairly rich.
Capstead Mortgage Corp. (CMO) is an agency mortgage REIT focused on adjustable-rate mortgages (ARMs). As such, it is considered safer than mREITs such as American Capital Agency (AGNC) that invest purely in fixed-rate mortgages (FRMs). The simple reasoning is that pure fixed-rate MBS players have a lot more duration exposure (these MBS's durations are currently in the 5-7 years range, versus 1-3 years on ARMs). However, mREITs that invest in FRMs tend to carefully...
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