Mortgage REIT pair trade? Maxim upgrades Capstead, cuts CYS

CYS Investments (NYSE:CYS) - led by Kevin Grant - has been the mREIT poster-child for riding the trend of falling interest rates in 2014. The stock is ahead 27% YTD while continuing to pay a fat dividend. A bull on the stock for some time, Maxim - worried about CYS's exposure what's looking like higher interest rates on the way - rings the register, downgrading to Hold from Buy.

Capstead Mortgage (NYSE:CMO) - up 9% YTD - holds a portfolio of short-duration ARMs, meaning less exposure to rising rates and less money needed to buy hedges to protect against rising rates, Maxim upgrades to Buy from Hold.

CYS is lower by 0.4% in premarket action.

Comments (2)
  • tstreet
    , contributor
    Comments (1035) | Send Message
    Why would CYS be different than any other MREIT besides CMO? Higher interest rates seem inevitable which is why I have felt for a long time that CMO should be overweighted vs the other MREITs. CMO held its value relatively well during the fiasco last year.
    3 Sep 2014, 10:22 AM Reply Like
  • MobilePreacher
    , contributor
    Comments (603) | Send Message
    tstreet, you are dead on. I mean there are slight mangement differences, some are longer duration than others, some hold their assets longer than others, some turn them over quite frequently... but CMO is definitely a different animal than all the rest.
    4 Sep 2014, 04:53 PM Reply Like
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