Seeking Alpha

The smart money begins to make a distinction between the mREITs and servicers or specialty...

The smart money begins to make a distinction between the mREITs and servicers or specialty mortgage investors like Ocwen (OCN +1.5%), New Residential (NRZ +3.7%), and Newcastle (NCT +1.4%). All opened to the downside but have turned higher since. To the extent they own servicing or credit-sensitive assets, one could make the argument they all benefit from higher rates. Others to keep an eye on: NSM, SFI, PMT, NRF.
 
Comments (5)
  • Bought NRZ at $6.40 on 06/25/2013, A gain of 14% in ten days, I can't complain.
    5 Jul 2013, 02:39 PM Reply Like
  • NCT has been my ray of hope the last 2 months! RSO has held strong too.
    5 Jul 2013, 03:45 PM Reply Like
  • Yep, I figure NRZ is interest rate neutral (shouldn't lose any book value to rising rates) and yield 9%.

     

    However, with today's fall some of the mREIT's are even more attractive. I bought AI and AGNC at the close. I think both are trading well below what their current book value would be. Probably to hedges not being properly valued.
    5 Jul 2013, 05:36 PM Reply Like
  • Time to buy more (NCT) and (NRZ). Both are flat over the last month.
    5 Jul 2013, 07:36 PM Reply Like
  • Considering the very low volume day and that over 70% of the trading volume was in the first 2 hours, I think the day can't really be construed as market sentiment. Trading desks were manned by thin crews and it did not take much to bid up a stock especially ones with lower market caps. OCN makes its money by taking distressed mortgages and services them finding ways for the people who own them to make payments. They were able to refi a number of the distressed mortgages at much lower rates. With increasing rates and refi's dwindling due to higher rates this would make their core business more challenging. Considering all the additional mortgages they got from ALLY and others, I wonder if the "Smart Money" did not get out of dodge early. It should be an interesting week.
    7 Jul 2013, 01:37 PM Reply Like
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