Seeking Alpha

Big downgrade and higher rates take piece out of mREITs

  • The mortgage REITs are maybe the poorest performing sector amid a big move higher in interest rates, and formerly bullish Deutsche Bank ringing the register on New York Mortgage Trust, CYS Investments, and American Capital Mortgage after nice runs for all have pulled them close to (or above in NYMT's case) book value.
  • There's also an earnings miss this morning from one of the last of the players to report Q4, Western Asset Mortgage.
  • Annaly (NLY -2.1%), American Capital Agency (AGNC -2.3%), Armour (ARR -1.4%), Two Harbors (TWO -1.8%), Invesco (IVR -2.7%), Capstead (CMO -1.2%), MFA Financial (MFA -2%), Apollo Residential (AMTG -1.7%)
Comments (21)
  • linkdonald
    , contributor
    Comments (665) | Send Message
     
    This may be a bit of overkill in the case of CMO. True; it will drop in net asset value in the short term but since it invests in adjustable rate mortgages, it will eventually catch up. In the meantime, it continues to pull income from these mortgages and make payouts to shareholders. is pullback may actually be a buying opportunity. Long CMO and NLY.
    7 Mar 2014, 12:57 PM Reply Like
  • Darren McCammon
    , contributor
    Comments (1364) | Send Message
     
    Market still seems to lump all mREITs together; not considering (or understanding) the differences in the assets they hold: agency, non-agency at a discount to par, commercial, MSRs, etc. or the specific drivers on each's book value. For one who takes the time to do so, these pull backs can be an opportunity.
    7 Mar 2014, 12:57 PM Reply Like
  • big dogs
    , contributor
    Comments (23) | Send Message
     
    Thanks for posting, Darren... you are spot on in noting the differences in assets held. To add a bit, there can be short term partial correlation to Tbond prices but not long or perfect correlation for reasons I have posted previously.
    7 Mar 2014, 01:01 PM Reply Like
  • speculative
    , contributor
    Comments (650) | Send Message
     
    All my holdings in this sector have covered my loss in share price with dividends except for one, ARR. With NYMT, I'm ahead 6.5% on share price and way ahead if factoring dividends. It's a turbulent sector and not for the faint at heart. I'm in this sector for the payouts which have more than covered my loss. All dividends received some 6 quarters ago are all gravy and will be adding more at these levels to reduce my cost/ shares while also increasing my payouts. They can downgrade all they want providing buying opportunities as I hate to buy for more than my current cost/share. NYMT is the only one I have bought above my cost and with the current drops, I will add. That is why we all diversify by adding growth stocks to our portfolios while generating income on the other end.
    7 Mar 2014, 01:13 PM Reply Like
  • Mourad Zarouri
    , contributor
    Comments (238) | Send Message
     
    I like the ETF REM in this environment... Both the share price and dividend held up RELATIVELY well through last year's blood bath of rising interest rates...
    7 Mar 2014, 01:53 PM Reply Like
  • U2A Ventures
    , contributor
    Comments (203) | Send Message
     
    Long $TWO this seems to be dropping on the news and not the facts.
    7 Mar 2014, 01:54 PM Reply Like
  • Jhalgren
    , contributor
    Comments (121) | Send Message
     
    ifjic seems correct--TWO is a well managed company with innovative ideas that generate profits.
    7 Mar 2014, 03:03 PM Reply Like
  • tstreet
    , contributor
    Comments (789) | Send Message
     
    Yes, CMO got caught in the downturn tide but notice it has lost less than the rest which has been its pattern over the last year. It pays less but has less volatility. Anyway, one day is not a trend with respect to interest rates. 10 year rate is still well below its highs for the year. But people in this market get nervous when we have these relatively large moves. This is based on what it is in reality a continuing crappy job market but people are thinking its better than expected due to the weather.
    7 Mar 2014, 03:24 PM Reply Like
  • smurf
    , contributor
    Comments (4256) | Send Message
     
    big move in higher interest rates? Where?
    7 Mar 2014, 03:38 PM Reply Like
  • newnnly
    , contributor
    Comments (248) | Send Message
     
    evidently the 10 year treasury went from 2.72% to 2.81% on the jobs numbers. The rate is at 2.79% right now so it's coming back down. Somehow I think the Deutsche Bank downgrade is more to blame for the sector underperforming today. And the earnings miss by Western Asset Mortgage caused a lot of sympathy selling of other companies.
    7 Mar 2014, 06:18 PM Reply Like
  • 11802571
    , contributor
    Comments (96) | Send Message
     
    Insiders must know more than anyone outside the company, or at least, retail investors such as myself. When I see a pattern of massive insider buying and
    relatively little or no selling by insiders, I feel more confident collecting dividends while I wait for share price appreciation, which usually takes time. Are any m-REITs exhibiting the above-described insider activity going out of business? If the insiders are investing their money, that makes me more willing to take the chance while collecting a payment for being patient. I believe it's prudent to examine insider activity before investing in ANY stock, including m-REITs. mho
    7 Mar 2014, 04:33 PM Reply Like
  • cbmetcalfe
    , contributor
    Comments (86) | Send Message
     
    Added a ton of ARR on the dip today. Solid financials and low P/B keep this one as #1 in my buy column. I'm bullish even with the small REIT pullbacks.
    7 Mar 2014, 06:03 PM Reply Like
  • davidlingrfelt
    , contributor
    Comments (5) | Send Message
     
    How stupid does Deutsche Bank think investors are. You can't downgrade almost a whole sector like this. Each has different asset classes MBS, HYbrid, Commercial, some buying stock back and so on. I will bet on Monday it will be business as usual because investors are not paying attention when they come out with this type of crap.
    If an analyst can pin point and discloses the specific area on a stock they can be confirmed and will have a definite effect in EPS or see's something in the future and again can be verified that one thing but this crap is a pure cow patty, especially just before dividend x-date.
    7 Mar 2014, 09:18 PM Reply Like
  • COBeeMan
    , contributor
    Comments (1433) | Send Message
     
    According to the explanation, Deutsche Bank simply sold their interest in NYMT, AGNC, CYS because their price is much closer to book value now and they think that indicates growth will be slower from here. I did not see a sector downgrade from them.
    8 Mar 2014, 09:38 AM Reply Like
  • tstreet
    , contributor
    Comments (789) | Send Message
     
    They did not sell AGNC. They sold American Capital Mortgage which is not the same stock. The stock is MTGE.

     

    I would say that people are being irrational if I didn't think this is a largely computer dominated market.
    8 Mar 2014, 09:58 AM Reply Like
  • COBeeMan
    , contributor
    Comments (1433) | Send Message
     
    Oops! You are right tstreet! That's what I get for typing before coffee! ;)
    8 Mar 2014, 10:29 AM Reply Like
  • speculative
    , contributor
    Comments (650) | Send Message
     
    Well, I'm actually glad NYMT has gone down. Not as much as I was hoping for but maybe some more on Monday. NYMT has become my best income provider in terms of $$$ vs %. I really want to double my position in NYMT closer to $7/share rather than $8/share. Am I making any sense? I'm confident they will at the very least, maintain the same dividend although I am hoping for a raise even if it's a penny. I'm also confident that within the next couple of quarters, NYMT will be posting news 52 week highs as it did recently.

     

    I'm up a nice 6.8% but I am not willing to give up the income they provide on a quarterly basis even if NYMT hit $10/share. With just the dividends alone my initial investment doubles in 18 months which to me, is right around the corner. Upon dividend announcement, expect NYMT to spike and after ex-div, as usually occurs, NYMT's drop will be less than the payout and above the spike.
    8 Mar 2014, 01:49 PM Reply Like
  • Joseph Poma
    , contributor
    Comments (439) | Send Message
     
    uh...yeah, sorry to burst your bubble, but you are not doubling your investment every 18 months. That would imply the dividend is >60% annually. Might want to check your math! :-)
    8 Mar 2014, 03:17 PM Reply Like
  • speculative
    , contributor
    Comments (650) | Send Message
     
    Uhhh...No bubble burst. At my rate which is 15.89% my investment doubles every 4.5 years and I have been in NYMT a little over 3 years. So, let me help you out here.

     

    4.5 years = 54 months minus 3 years (36 months) leaves 18 months remaining. I could have sworn I wrote that my initial investment will double in 18 months, not every 18 months. Please check what I wrote, my Kindle acts funny when I scroll while composing. I could be wrong but I highly doubt it, I checked my math. ;-)
    8 Mar 2014, 05:06 PM Reply Like
  • tboyette
    , contributor
    Comments (16) | Send Message
     
    Hi just retail investor reading watching
    Webinars studying options charts etc for past
    Five years
    9 Mar 2014, 10:25 PM Reply Like
  • tboyette
    , contributor
    Comments (16) | Send Message
     
    I'm long all the way all in
    On morl. And will be as often
    As I can on dips.
    9 Mar 2014, 10:26 PM Reply Like
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