Anthracite Capital Deserves More Than Cramer's Cliffs Notes

Maybe it was the pressure of the lightning round, maybe it was just too easy to plug Annaly Capital (NLY) (again), but Cramer slipped up a couple weeks ago when he told a caller that Anthracite Capital (AHR) was "a residential REIT. ... just buy NLY... I'm sorry I can't be more positive." Anthracite Capital is actually a CMBS and commercial whole loan investor. The company focuses on acquiring pools of performing loans in the form of commercial mortgage-backed securities, issuing secured debt backed by CMBS, and providing strategic capital for the commercial real estate industry in the form of mezzanine loan financing. The company has a minimal amount of RMBS on the balance sheet, but certainly not enough to label it a residential REIT.

Anthracite is externally managed by an affiliate of BlackRock, Inc. (BLK) and yields about 15%. The company has maintained a pretty stable dividend throughout its ten-year history. Anthracite pursues a fairly aggressive strategy, acquiring mostly B-notes and subordinate CMBS. As a result, its balance sheet is exposed to impairments and other valuation adjustments. However, from a liquidity standpoint, Anthracite is fairly solid, having only about 15% of its assets non-match funded. At a 15% yield and at 0.85x book value, Anthracite is reasonably valued, given its less-efficent external management structure and riskier assets. Nonetheless, its business model -- to deliver high risk-adjusted returns through the acceptance of credit risk and selective commercial investment -- deserves much more than Cramer's cursory dismissal.

Disclosure: none

Comments

[pickaroonwyo]

Right on! Saw the Cramer comments last week and whinced at his ignorance. I own AHR, it's risky, but I'm not selling.

[digivision]

AHR has great management , it's one of those reit that needs to be held long term , their exposure to residential loans is minimal they are very diversified . I don't consider AHR riskier than any other REIT


On Dec 13 02:07 AM pickaroonwyo wrote:

> Right on! Saw the Cramer comments last week and whinced at his ignorance.
> I own AHR, it's risky, but I'm not selling.

[hrant]

i own AHR both common and preferred and are very satisfied. just look its performance in may 08