Three notable downgrades in mREIT sector

Keep an eye on the hot mortgage REIT sector today as Deutsche cashes in its chips on three bullish calls.

New York Mortgage Trust's (NYMT) cut to Hold is a valuation call, with analyst Stephen Laws acknowledging solid Q4 results and good prospects going forward, but noting the stock price is already near his raised price target of $7.75 (from $7). NYMT is the rare mREIT at the moment trading above book value.

Neither CYS Investments (CYS), nor American Capital Mortgage (MTGE) are at book, but both have moved a lot closer to it this year, and Laws cuts both to Hold, believing dividends, not capital appreciation will drive any returns from current levels. "Given investor concerns of higher interest rates, we believe it is unlikely that shares of agency MBS managers will trade at or above book value in 2014."

Deutsche, he says, currently forecasts the 10-year Treasury yield to hit 4% before year-end, likely keeping a lid on price-to-book ratios for the agency players.


Comments (6)
  • Dividends#1
    , contributor
    Comments (4330) | Send Message
    Wow, 4% on the 10 year Treasury before year end. I highly doubt that. Anything can happen, but since the majority believe this, I will take the other side of this trade.


    I see the 10 year testing 2% before year end, then climbimg higher to test 3% and settling in between 2.50 and 2.80% as the year progresses.


    A correction is coming in the major indexes before year end. Look for the S&P 500 to peak in 2014 and then retreat about 15%, as interest rates drop. The S$P 500 will then rebound, however probably only a small gain for 2014 at best.
    7 Mar 2014, 07:26 AM Reply Like
  • jj327us
    , contributor
    Comments (21) | Send Message
    And history has shown that a stock market crash will happen when we least expect it. This happened in 2000 and 2008 respectively on the basis of debt/margins in the market.
    7 Mar 2014, 08:43 AM Reply Like
  • Jonathan Bluhm
    , contributor
    Comments (409) | Send Message
    ARR is looking more and more like the solid pick of the REITs this year.
    7 Mar 2014, 08:46 AM Reply Like
  • tstreet
    , contributor
    Comments (1035) | Send Message
    Why do you say it is the solid pick? What are they doing that the others aren't?
    7 Mar 2014, 09:44 AM Reply Like
  • Bingy77
    , contributor
    Comments (252) | Send Message
    This seems like a kind of weak downgrade to get the stock prices back down before dividend announcement.
    7 Mar 2014, 09:41 AM Reply Like
  • tstreet
    , contributor
    Comments (1035) | Send Message
    If interest rates go up, then book values will likely go down. This will tend to increase the price/book ratio unless, of course, price goes down in tandem with book. Anyway, what did the article mean by there would be a lid on price/book ratios.
    7 Mar 2014, 09:43 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs