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Alpha Found: Capstead Mortgage, The 'Perfect' Security

Elevator Pitch

Capstead Mortgage Corporation (CMO) might be one of the most misunderstood and mispriced securities in the stock market

Thesis & Catalyst For Capstead Mortgage Corporation

This company is undervalued because many people make the mistake of trading it along with all the other mortgage REITs in the sector as they trade along with the 10 year treasury. In reality, CMO has very little exposure to rising long-term rates, and should not trade along with the other mortgage REITS that do.

Valuation

Current book value for CMO is around $12.80. With current construction of its assets having a beta of .01 leveraged around 8x to 9x, at the most CMO should be trading at 1% to 2%...

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