Nov. 8, 2013, 9:51 AM
- Sharply higher interest rates has a number of mREITs (REM -2.4%) hitting new 52-week lows. Most of the stocks were already on the defensive over the past few sessions following near-universally disappointing Q3 results.
- Annaly (NLY -3.3%), American Capital (AGNC -2.9%), (MTGE -2.5%), Armour (ARR -3.7%), Invesco (IVR -3%), CYS Investments (CYS -5.3%), Hatteras (HTS -3%).
- Other related ETFs: MORT, MORL.
- Earlier: Big beat on jobs number sends Treasury prices south.
Oct. 29, 2013, 9:20 AM
- The first post-earnings downgrade for American Capital Agency (AGNC) comes from BAML, which removes its Buy rating. The quick take from the company's results (reported last night) shows CIO Gary Kain lightening up the portfolio and shortening duration just as the bond market was set to reverse course and move sharply higher. Today's 11 ET conference call should prove a worthy listen. AGNC -4.7% premarket.
- Armour Residential results show pretty much the same thing, with the book dropping to $16.7B from $22.6B a quarter earlier. ARR -4.1%.
- Other agency players premarket: Annaly (NLY) -1.9%, CYS Investments (CYS) -0.8%.
- Kain's non-agency vehicle: American Capital Mortgage (MTGE) -4.3%.
- ETFs: REM -0.6%. Also: MORT, MORL.
Oct. 28, 2013, 4:38 PM
- Core income - includes unrealized gains - of $0.11 per share compares to $0.18 in Q2. Q2 quarterly dividend was $0.21 per share.
- Book value per share of $5.26 off 3.1% from $5.43 at the end of Q2. Today's close of $4.38 puts the stock at a 16.7% discount.
- Company sold $6B of MBS during quarter and realized losses of $301M. Portfolio size of $16.7B at end of quarter compares to $22.6B at end of Q2. Leverage of 6.93x.
- Net interest margin of 1.24% is off 14 basis points from Q2.
- ARR -1.8% AH.
- Q3 results, press release.
Oct. 28, 2013, 4:36 PM
Sep. 24, 2013, 2:45 PM
- The mREIT (REM -0.5%) environment has turned favorable, says Maxim's Michael Diana, but non-agency players are his favorites due to less leverage and exposure to higher home prices. His favorite picks:
- Ellington Financial (EFC +1.2%) - a non-REIT which gives it "the ability to hedge and trade on an unrestricted basis [and profit from] volatility." His target price is $28 (Ellington Residential EARN is the REIT version).
- Two Harbors (TWO -0.3%) - “due to substantial non-Agency and hedging expertise, as well as diversification.” The price target is $11.50.
- American Capital Mortgage (MTGE +1.2%) - price target $25.
- Eleven mREITs have cut their dividends this quarter, but pricing below book value still leaves yields high - 13.9% average for agency REITs, and 13.1% for hybrids.
- Other buy-rated mREITs at Maxim: AMTG, DX, AGNC. Hold-rated: MITT, ARR, HTS, JMI.
- Related ETFs: MORT, MORL.
Sep. 19, 2013, 9:13 AM
Sep. 19, 2013, 7:30 AM
Sep. 18, 2013, 5:42 PM
Sep. 18, 2013, 2:29 PM
- Most stocks are partying in wake of the Fed not commencing its QE taper today, but one sector of note is the beaten down mortgage REIT (REM +2.8%) group.
- Annaly (NLY +3.2%), American Capital (AGNC +3.5%), (MTGE +2.4%), Armour (ARR +3.4%), Two Harbors (TWO +3.4%), CYS Investments (CYS +3.7%), Anworth (ANH +2.8%), Western Asset (WMC +2.2%), Javelin (JMI +2%), AG Mortgage (MITT +2.1%), Arlington Asset (AI +1.6%).
- Yesterday, KBW called out CYS Investments as one of the more aggressive plays for those believing rates might head lower.
- ETFs of note: MORT, MORL.
Sep. 17, 2013, 12:53 PM
- MLV Capital initiates coverage on some names in the mREIT sector, starting Dynex (DX +1.9%), Armour Residential (ARR +0.6%), and Hatteras (HTS +1%) all with Buys.
- Dynex: The stock is still in the "penalty box" after the company reported a surprisingly high 15% decline in Q2 book value. Focused on rising long-term rates, investors are ignoring mitigating factors like slower prepayment speeds. Earlier: Dynex cuts its dividend in Q3.
- Armour: The stock trades at a 26% discount to book and yields nearly 21%. Even a 30% cut in the dividend only brings the yield down to 15%. The discount to book and massive yield seem to have priced in the company missing a margin call or two.
- Hatteras: "The company is being punished for doing all the right things," says MLV, though in the next sentence the team reminds book value plummeted 21% in Q2. Like with Dynex, the market is too focused on rates, and not slowing prepayment speeds.
Sep. 16, 2013, 1:32 PM
- "The stock prices do not fully reflect the risks to the agency mortgage REIT model," writes Sandler O'Neill in its downgrade of American Capital (AGNC -1.2%) and Armour Residential (ARR +0.4%). The risks:
- Price volatility in MBS, the overhang of what the Fed might do with $1.3T of MBS on its balance sheet, other MBS owners could become sellers - namely mutual funds and other mREITs, retail skittishness could widen discounts to book value even further, and the transition to a new Fed chairman.
- While not cutting earnings estimates, Sandler does cut AGNC's price target to $21 from $25, and ARR's to $3.50 from $4.50.
- The average book value/share of agency mREITs fell 4.5% in Q1, 14.7% in Q2, and "we don't think all the volatility is behind us." Book value could fall another 10-25% if some of the above risk factors play out. Additionally, Sandler expects the agency mREITs to trade at a 10-20% discount to book as long as the overhang of the Fed being a seller remains.
- Earlier: The downgrade and Compass One's differing opinion.
- Related ETFs: REM, MORT, MORL.
Sep. 16, 2013, 12:07 PM
- There's another Buy rating in the mREIT sector from Compass Point, with the firm upping Armour Residential (ARR +0.7%) to Buy with $5 price target. Earlier, the research firm raised Western Mortgage to Buy, and initiated a number of other non-agency players at Buy.
- Armour Residential is notable among this group for being the only pure-agency mREIT.
- Sandler O'Neill sees Armour differently, downgrading to Sell.
- The bond market continues to have a big day with the 10-year yield off 8 basis points to 2.82%.
Sep. 16, 2013, 8:48 AM
- Compass Point upgrades Western Asset Mortgage (WMC) to Buy with $17.50 price target.
- Shares +2.5% premarket, but it's likely more about Summers withdrawing from the Fed chairman's race. NLY, AGNC, ARR, IVR, and TWO are all up more than 2% in early action.
- Earlier: Compass point initiates coverage on several non-agency mREIT names, starting them all at Buy.
- Related ETFs: REM, MORT, MORL.
Sep. 11, 2013, 10:30 AM
- Trading at about 10% discounts to book, Gundlach thinks the mREITs (REM +0.2%) offer value, but he doesn't expect much price appreciation in the near-term. His favorites are the agency players as he believes they'll outperform over an entire cycle.
- He mentions Annaly (NLY +0.9%) specifically as a both a well-run mREIT and a good proxy for the entire sector. Even should the annual dividend drop to $1 (vs. $1.60 now), it's still near a 9% yield, he says.
- Last night's webcast.
- Late August: Gundlach turns bullish on mREITs
- Other ETFs: MORT, MORL.
- Other agency players: AGNC, ARR, HTS, CYS, CMO.
Sep. 3, 2013, 12:17 PM
- Armour Residential (ARR -2.9%), CYS Investments (CYS -2.3%), and Hatteras Financial (HTS -2.5%) are leading the mREIT sector (REM -1.3%) lower as interest rates again move sharply higher.
- Other movers include Annaly (NLY -1.6%), Western Asset (WMC -1.5%), and Ellington (EARN -2.2%), (EFC -2.1%).
- Other ETFs: MORT, MORL.
- Still occasionally lumped in with mREITs, specialty mortgage servicers gain as the market now realizes the value of MSRs increases as rates move higher (fewer prepayments). Ocwen (OCN +4.1%), Nationstar (NSM +2.4%), Walter Investment (WAC +1.8%).
Aug. 29, 2013, 1:02 PM
- In a major about-face, Jeff Gundlach turns bullish on the mortgage REIT sector (REM +0.7%), telling CNBC he spots value as many are trading at 10% or more discounts to net asset value. He specifically mentions Annaly (NLY +1.3%) as being a buy. Reported book value as of June 30 is $13.03 vs. the current price of $11.50.
- Other popular names trading at big discounts (though not mentioned by Gundlach): AGNC, ARR, IVR, HTS, CYS, CMO, MTGE, DX, WMC, JMI, EARN, to name a few.
- Other mREIT ETFs: MORT, MORL.
- He's also a fan of closed-end income funds trading at wide discounts to NAV. None are mentioned, but PDI, PFN, and PFL come to mind. DoubleLine's own DBL is trading right about at NAV.
- Of Apple's (AAPL +0.6%) big run to $500? "All the easy money has been made ... It's kind of dead money."
ARR vs. ETF Alternatives
ARMOUR Residential REIT Inc invests in and manages a leveraged portfolio of residential mortgage backed securities. Itinvest in residential mortgage backed securities issued or guaranteed by a United States Government-sponsored entity.
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