Seeking Alpha

Sizable bounce for mortgage REITs

  • Sector giants Annaly (NLY +3.3%) and American Capital Agency (AGNC +4.3%) are the leading gainers, followed but Armour (ARR +2.6%), MFA (MFA +2.7%), Dynex (DX +2.8%), New York Mortgage (NYMT +3.3%), and Western Asset (WMC +2.8%) as interest rates take a breather from going up.
  • Earlier: This year's Treasury bear market may be the worst one yet.
  • Especially ugly trade in the preferreds of many of the agency mortgage REITs have some traders wondering if retail panic isn't ringing a bell for a bottom in the sector. Today, the action isn't necessarily ugly, but it is sloppy - with different preferreds of the same issuer (Armour, for example I, II) trading in different directions even as both represent the same credit risk.
  • ETFs: (REM +2.4%), (MORT +2.7%), (MORL +5.8%).
Comments (25)
  • Cavalaw
    , contributor
    Comments (123) | Send Message
     
    The key issue is ,,....when will Mreits bottom out?
    20 Aug 2013, 11:11 AM Reply Like
  • Stan The Man
    , contributor
    Comments (154) | Send Message
     
    I think the emerging markets are sending a message that the world economy is fragile and would be badly hurt by fed tightening at this point. Granted, the fed is not talking about tightening, just about turning down the faucet slightly to reduce the volume of their purchases somewhat. Nonetheless, the possibility of their taking this modest action has spooked credit markets, with consequences even more dire abroad than for our economy. The fed probably understands the danger of spooking world credit markets and they have it within their power to help matters by continuing their full purchases for somewhat longer. Needless to say, an announcement like that from the fed would drive down interest rates, and that would cause a big bounce in MREITs.
    20 Aug 2013, 11:27 AM Reply Like
  • COBeeMan
    , contributor
    Comments (1363) | Send Message
     
    Maybe the Fed should stop making announcements...too many hand wringers in the market causing irrational swings is not helping the recovery!
    20 Aug 2013, 11:36 AM Reply Like
  • financeminister
    , contributor
    Comments (817) | Send Message
     
    To sell or not to sell, that is the question
    20 Aug 2013, 12:19 PM Reply Like
  • konihug
    , contributor
    Comments (64) | Send Message
     
    I'd rather say: WHEN TO BUY is the question. Selling is not really an option now, at least for me. I have decided to sit this out; the pendulum will swing back, as always.
    20 Aug 2013, 12:46 PM Reply Like
  • COBeeMan
    , contributor
    Comments (1363) | Send Message
     
    Perhaps another question (or 3) would help...where will you put your money if you sell, will the total return be better than if you hold, and will a paper loss this year be useful on your taxes?
    20 Aug 2013, 12:47 PM Reply Like
  • financeminister
    , contributor
    Comments (817) | Send Message
     
    As the interest rate environment is still volatile, I don't feel comfortable buying mREITs or adding to existing positions. I currently have 4% of my portfolio in Dynex Capital (DX). If it was more or less certain that dividends are sustainable, I have no problem holding.... that's the only question that begs the question of whether to sell or not sell. I don't want to sell but the macro economic conditions on interest rates seem to be finicky. If I sell, I can park the proceeds to safer blue chip dividend stocks or even hold the cash short term incase there is further taper tantrum and get cheaper entry points. The paper loss can be used for taxes but once again, if the dividends are sustainable, I'm glad to hold.
    20 Aug 2013, 01:24 PM Reply Like
  • murray555
    , contributor
    Comments (324) | Send Message
     
    I agree Konihug. Too many times in the past I have been scared into selling stocks that I regretted later. Had I held them I would have made out great. I forget who said, "If you aren't willing to hold a stock for 10 years, why hold it for 10 minutes?" Was that Warren Buffet? Not sure.
    20 Aug 2013, 02:31 PM Reply Like
  • ezrhino
    , contributor
    Comments (171) | Send Message
     
    if you are still in the mreits and have been for any length of time
    you have alreadt thrown out the 8-10% loss rule. to sell or not was the decision in June
    20 Aug 2013, 12:44 PM Reply Like
  • Nostradumbass
    , contributor
    Comments (113) | Send Message
     
    I thought we HAD reached bottom a while ago, but was wrong. mREITS have become too much of a bet with interest rates and against the market which can indeed remain irrational for far longer than I can remain solvent.
    20 Aug 2013, 01:18 PM Reply Like
  • magi48
    , contributor
    Comments (184) | Send Message
     
    The real question is: When will Congress address mortgage REITS?
    They already think they are not being regulated enough.
    20 Aug 2013, 02:06 PM Reply Like
  • jweissman
    , contributor
    Comments (525) | Send Message
     
    Peep are dabbling with the bounces, but bailing quik enuf. Ther'v been many false turnarounds since June. Beware of smiling faces hyping these things.
    20 Aug 2013, 03:03 PM Reply Like
  • holcomb@montrose.net
    , contributor
    Comments (10) | Send Message
     
    When I buy mREITS, I divide their dividend in two. If the dividend yield is still within the 8-10% area, and all other factors for me are positive, I then buy on dips. I bought some AGNC yesterday at $20.50, a 10.2% yield with a dividend cut in half. Still darn good in this market.
    20 Aug 2013, 03:09 PM Reply Like
  • Phattboy43
    , contributor
    Comments (125) | Send Message
     
    themontrose.....be careful. "picking up" some agnc yesterday at 20.50 is a risky proposition. NO ONE knows what this interest rate environment will produce. More importantly, NO ONE, not even the bright authors on this site, know what the bottom will be here. I say be careful because people were "picking up" WMC at bargain prices at 22 then 18 then 16 now 15. ARR at 6.50, 6 5.50 4.50 4 and now under $4. Point is, if dividend on AGNC gets cut to say......70 cents per quarter you are looking at a 13% yield. These stocks have no sales, no growth and declining margins. Never mind "book value". If a formerly 22% yielding stock is suddenly struggling to yield 12-13% (it's plausible) what does that do to the stock price. Where is the bottom here? No one knows.
    20 Aug 2013, 04:55 PM Reply Like
  • holcomb@montrose.net
    , contributor
    Comments (10) | Send Message
     
    I agree with you on know one knows where the bottom is. If the 10 year treasury hits 6% down the road - who knows? I am buying for the LT and looking for a dividend yield to stabilize in the 7-8% area. We'll see??? Thanks for your comment.
    21 Aug 2013, 01:49 PM Reply Like
  • Phattboy43
    , contributor
    Comments (125) | Send Message
     
    BTW...it was a nice performance today. Indeed, we've also seen this before. Heavy selling. A nice bounce due to "bargain hunters" then another drop. I recall WMC hitting a low of 17.75 only to bounce back the next day to 19. It's now at 15 and change. Just sayin'
    20 Aug 2013, 05:09 PM Reply Like
  • COBeeMan
    , contributor
    Comments (1363) | Send Message
     
    Phattboy43 - what stocks do you currently own, and what are you looking to buy?
    20 Aug 2013, 06:39 PM Reply Like
  • Brian Bobbitt
    , contributor
    Comments (1905) | Send Message
     
    My only comment is to refer to my previous comments ( and they are many ) supporting REITs when so many articles attempt to shoot them down, making many scurry for the exits, and losing a lot of dividends they could be reaping. This just shows that there are many people out there who must benefit from being negative on a given subject, I believe, so they can squash a price so they can buy it later lower. I dunno, but I have my suspicions. Again, look at my comments and do your own analysis and get the facts. Don't be herded around by soothsayers and verbal road agents stealing your money.

     

    Capt. Brian
    The Lost Navigator
    20 Aug 2013, 11:38 PM Reply Like
  • Brian Bobbitt
    , contributor
    Comments (1905) | Send Message
     
    As my investigation deepens, I am slowly softening on the high flying (high dividend) REITs...

     

    There is a gathering evidence that these REITs are dragon filled pits. Not making a strong statement against them [yet].
    Capt. Brian
    The Lost Navigator
    23 Aug 2013, 02:11 PM Reply Like
  • COBeeMan
    , contributor
    Comments (1363) | Send Message
     
    Aye Cap'n! There be dragons alright! ;)
    23 Aug 2013, 03:44 PM Reply Like
  • rrs2205rrs
    , contributor
    Comments (128) | Send Message
     
    ARR and JMI have to be the most oversold REITs
    21 Aug 2013, 07:11 PM Reply Like
  • COBeeMan
    , contributor
    Comments (1363) | Send Message
     
    rrs - I think people took it as bad management when ARR lowered dividend a little each quarter in preparation instead of sticking it out and cutting all at once like AGNC. It will take overwhelming recovery numbers to undo that loss in trust.
    22 Aug 2013, 09:06 AM Reply Like
  • ezrhino
    , contributor
    Comments (171) | Send Message
     
    this industry was given a leg up by ben berneke and he has now knocked the legs out. We cannot set the clock back that time is over and we have to get over it. At some point the interest rates will top out who knows when. There are other things to buy that pay monthly income like PSEC for instance.
    23 Aug 2013, 08:56 AM Reply Like
  • Skippy09
    , contributor
    Comments (1602) | Send Message
     
    IMHO...anyone long REITS in the face of FED slowing easing has more guts than I do. It was a good run while it lasted for me (with AGNC) but I am very happy I closed out at close to a 52 week high.

     

    I'm open to criticism here.
    24 Aug 2013, 10:33 PM Reply Like
  • Phattboy43
    , contributor
    Comments (125) | Send Message
     
    Skippy09, I agree. Although I did not exit at 52 week high, I sold all of my positions in all mREITS. These instruments are way too complex to know what they will do in this evironment. The difference between 10yr at 2.4% and a potential 3.3% or higher is gigantic for these guys. I am also open to criticism, but I see AGNC as at $17 by year's end. Even with good management, there is no way to know what the interest rate environment will do. This uncontrollable variable is critical to these instruments.
    25 Aug 2013, 10:09 AM Reply Like
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