Why The mREIT Stocks Have Probably Bottomed Out

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 |  Includes: AGNC, ARR, CIM, HTS, MFA, NLY, REM
by: Hawkinvest

It's been a rough few weeks for most investors, and even tougher for some shareholders in the mortgage REIT stocks. There has been a perfect storm of forces that seem to be working against the mREIT stocks recently.

Some investors were concerned the Obama Administration would propose a plan that would allow homeowners with no equity to refinance at lower rates, as this would reduce returns for investors. New concerns about the sector also surfaced from the Securities and Exchange Commission (SEC) when they announced an inquiry into the amount of leverage that these companies use.

A recent article in National Mortgage News details those concerns. However, the concerns are probably overblown and the article goes on to say:

Eckert, who covers real-estate companies including American Capital Agency Corp., Anworth Mortgage Asset Corporation and Hatteras Financial Corp., said he does not think the SEC will ultimately remove the exemption for all mortgage REITs. Other analysts also downplayed the likelihood of widespread regulatory changes to the industry, but warned about the possible consequences if the SEC does in fact remove the exemption.

The crisis in Europe is also making investors wonder if the funding market will dry up for these companies, but that has not happened and the Federal Reserve is standing by to provide liquidity if needed. While these investments have some risk, the yields are incredibly high and if the SEC does not make any changes to the current status of these companies, the shares are likely to rebound. These stocks fell significantly on Tuesday when the markets dropped in the morning, but have rebounded somewhat. That drop could have been the capitulation in this sector that indicates a hard bottom. Here are a number of mREIT stocks that investors might wish they had bought at current levels:

Chimera Investment Corporation (NYSE:CIM) is a real estate investment trust (REIT) that invests in residential mortgage-backed securities, and both commercial and residential mortgage loans. With a yield of about 18%, and a share price below book value, this looks like a great buying opportunity. Insiders have been buying shares in the past several weeks.

Here are some key points for CIM:

Current share price: $2.55

The 52 week range is $2.38 to $4.36

Earnings estimates for 2011: 60 cents per share

Earnings estimates for 2012: 59 cents per share

Annual dividend: 52 cents per share which yields 18.3%

Book value: $3.35 per share

Annaly Capital Management, Inc., (NYSE:NLY) is a mortgage real estate investment trust (REIT) company, based in New York. Annaly pays a dividend of about $2.60 annually which is equivalent to a yield of around 14.6%. Cramer has given this stock a buy rating.

Here are some key points for NLY:

Current share price: $15.66

The 52 week range is $14.05 to $18.79.

Earnings estimates for 2011: $2.53 per share

Earnings estimates for 2012: $2.38 per share

Annual dividend: $2.60 per share which yields 14.4%

Book value: $16.55 per share

American Capital Agency (NASDAQ:AGNC), is a real estate investment trust (REIT) that invests in residential mortgage-backed securities, and both commercial and residential mortgage loans. On Tuesday, October 4, 2011, this stock plunged to $22.84 on heavy volume. It has rebounded sharply since then and that could indicate we have seen the bottom for this stock.

Here are some key points for AGNC:

Current share price: $26.28

The 52 week range is $22.03 to $30.76

Earnings estimates for 2011: $4.02

Earnings estimates for 2012: $5.47

Annual dividend: $5.60 per share which yields about 20.7%

Book value: $26.76 per share

Hatteras Financial Corp (NYSE:HTS) is a mortgage real estate investment trust (REIT) company, based in North Carolina. HTS trades at a discount to book value. On Tuesday, October 4, 2011, this stock plunged to $22.33, (a new 52 week low) on heavy volume and has started to recover.

Here are some key points for HTS:

Current share price: $23.64

The 52 week range is $22.33 to $31.98.

Earnings estimates for 2011: $4.20 per share

Earnings estimates for 2012: $4.23 per share

Annual dividend: $4 per share which yields 15.2%

Book value: $26.72 per share

MFA Financial (NYSE:MFA) is a real estate investment trust (REIT) that invests in residential mortgage-backed securities. MFA trades at a discount of about 10% to book value. On Tuesday, October 4, 2011, this stock plunged to $6.25, and this was a new 52 week low. Insider have been buying shares recently.

Here are some key points for MFA:

Current share price: $6.55

The 52 week range is $6.25 to $8.64

Earnings estimates for 2011: $1.01 per share

Earnings estimates for 2012: $1.06 per share

Annual dividend: $1 per share which yields 14.2%

Book value: $7.75 per share

Armour Residential REIT (NYSE:ARR) is a real estate investment trust (REIT) that invests in residential mortgage-backed securities. ARR trades for a premium of about 2% to book value, but offers a very high yield at nearly 20%. On Tuesday, October 4, 2011, this stock dropped to a new 52 week low of $5.40, but has rebounded sharply since.

Here are some key points for ARR:

Current share price: $6.42

The 52 week range is $5.40 to $8.33

Earnings estimates for 2011: $1.01 per share

Earnings estimates for 2012: $1.06 per share

Annual dividend: $1.44 per share which yields 19.4%

Book value: $7.14 per share

iShares FTSE NAREIT Mortgage REIT (NYSEARCA:REM) is an exchange trade fund (ETF) that invests in a number of mortgage real estate investment trusts. This allows investors to have diversification across a number of holdings in this fund which include: Annaly Capital, American Capital Agency, Chimera Investment, MFA Financial and others. Because of the diversification, this is a lower risk way to play this sector.

Here are some key points for REM:

Current share price: $12

The 52 week range is $11.28 to $16.07

Earnings estimates for 2011: n/a

Earnings estimates for 2012: n/a

Annual dividend: about $1.50 per share which yields over 10%

Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.