If you are considering an investment in a stock that is sure to rise, you would do well to buy a REIT stock such as CYS Investments (CYS). This assertion is justified in lieu of the fact that players in this industry have been guaranteed a level playing ground that will ensure that shareholders smile to the banks repeatedly for the next couple of quarters.
One of the main points that will make REITs like CYS Investments profitable is the decision of the Federal Reserve to keep the funding rate of federal funds near an unprecedented zero through the end of 2014. This surely means that investors have an opportunity to profit for at least three more quarters after the initial mid-2013 plan to stop the lending scheme.
REITs are sure to profit from the new development because the difference between the two ends of their operations will lead to increased profits. For instance, CYS Investments will be able to record profits when you consider the difference between the rate at which it borrows money from the Federal Reserve and the rate at which it lends the money to homeowners through its many mortgage products.
In fact, when you consider the overhead cost of running operations, you will observe that CYS Investments will still have large pie to share between investors at the end of the quarter. Thus, without wasting time, it can be said that the Federal Reserve has given you the key to buying a stock that is sure to stay on the rise.
Another announcement should help determine the trend of a stock. CYS Investments through its CEO Kevin E Grant is set to deliver a presentation at the Wells Fargo Securities 2012 Specialty Finance Symposium. The said Symposium is set to take place in New York City on May 23 and could give you an inkling of what you the plans that CYS Investments have to move on to greater profitability.
Another piece of news that investors will surely like in the recent news is that CYS Investments has been branded with an outperform label at Wells Fargo within the range of $14 and $15. Analyst Joel Houck said:
Our Outperform rating is based on (1) CYS's strong and seasoned management team (2) internally managed entity in which company management and investor interests are aligned and (3) strong risk management. We believe CYS is strong in the agency space and provides investors with a balanced approach in an environment where both prepayment and extension risk exist. We are establishing 2012 and 2013 EPS estimates of $2.23 and $2.21, respectively.
This piece of news will surely see CYS Investments rising because its gives a logical explanation for future possibilities. I also have reason to believe that the outperform is justified given the basis of the credibility of the strong management team of CYS Investment.
On the other hand, one of its competitors, Annaly (NLY) is losing the credibility of its management team with the recent news that its CEO Mike Farrell took a whooping $35 million home. $35 million is a huge amount of money, and in fact, news has it that his specific salary was more than the combined salary of the CEOs of the six largest banks in the United States.
Interestingly, the stockholders of Annaly will need a good explanation for the rationale behind the payment of such an enormous amount of money. Certainly, the market situation of the stock does not really justify such a pay. One of the reasons for this assertion is that the earnings per share of Annaly's stock is a paltry $0.49 with a dividend of about $0.55 per share as at May 9, 2012.
If you have been following the trends of some major REITs such as Equity Residential (EQR), you will remember that it made a decision to acquire about 26.5% ownership interests in Archstone which happens to be a privately held owner, developer and operator of multifamily apartment properties. The cost of the acquisition was said to be about $1.325 billion.
Nonetheless, news has it that Lehman Brothers Holdings, which is one of the partners in Archstone, had exercised its "right to first offer "and had purchased 26.5% out of the combined estate of the remaining partners. However, Equity residential has also been given exclusive right of purchasing the rest of the estate for an estimated $1.5 billion. The good news for Equity residential is that buying the property will surely increase its asset base and increase its chances of making more money for shareholders.
More so, should Lehman Brothers Holding exercise its "right to offer" again to purchase the rest of the property, Equity Residential will be able to claim about $80 million as a break-up fee from the other partners. In essence, Equity residential stands to gain much and invariably rise irrespective of the outcome of the deal.
As a smart investor, you will also do well to watch out for AvalonBay Communities (AVB). The reason for this is that this competitor has positioned itself to rise with the wave of change that is blowing across the housing market in the United States. You will observe that the rising interest rates, combined with failing economy and unavailability or credit facilities is making it hard for people to stick to single family homes.
In fact, the trend has seen the change that involves more and more people moving into rental homes, probably because it is a whole lot easier on their finances. If you're looking for another sure-to-rise stock other than CYS Investments, you will do well to consider AvalonBay.
It may also interest you to know that American Capital Agency (AGNC) has been ranked second among stocks that are expected to perform brilliantly in the next quarter. The stock surpassed the expectations of analysts by over 22% in the last quarter, and looks to continue the trend.
CYS Investment is ready to ride the avenue of profitability and success. Get on board.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.