Long/short equity, portfolio strategy, dividend growth investing

Capstead Mortgage Part Two: 3 Negatives And 1 More Positive

This is part two of my analysis of Capstead Mortgage (NYSE:CMO). In my previous article I articulated many positive attributes of CMO. Here let me first deal with the three negative attributes.

1. Market Failure: In the near term, when interest rates are under pressure, the mREIT sector is strongly affected. CMO gets swept into this current, but usually reverts to its fundamentals when volatility subsides. The vast majority of the mREIT universe is composed of companies (Annaly (NYSE:NLY), American Capital (NASDAQ:AGNC)) that hold long-term fixed rate mortgages using high leverage tied to short-term interest borrowing. When long-term rates go up, they are locked into lower yields on their mortgage portfolio, and when short-term

Join Seeking Alpha PRO to read this archived article and 11,574 other archived articles
IDEA GENERATORXExclusive access to 10 PRO ideas every day
INVESTING IDEAS LIBRARYXExclusive access to PRO library of more than 15,000 ideas
SECTOR EXPERT NETWORKXExclusive access to all sector experts for direct consultation
PERFORMANCE TRACKINGXTrack performance of all PRO stock ideas
PROFESSIONAL TOOLSXProfessional Idea Filters to zero-in based on industry, market cap and more
"In just the first month of using PRO, I used it to generate two ideas which were actionable for me. As a result of these two positions, I have earned more than 20 times the annual subscription costs for PRO."Michael Yagemann, Greenbridge Capital
"I am pleasantly surprised with the scope of small and mid-cap coverage PRO offers. You can't find that any where else."Patrick Rice, Mainstay Capital Management
You may cancel at any time for any reason, and receive a prompt refund for membership on months paid and not used (max. 6 months). Details