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."
Aug. 20, 2013, 10:50 AM
- 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%).
Aug. 19, 2013, 3:09 PM
- A solid selloff in mortgage REITs (REM -3.7%) turns into a rout as the 10-year Treasury yield takes out another 2-year high at 2.89%. Looking at the short end, September 2015 Eurodollar futures at 98.65 are pricing in more than 100 bps of rate hikes between now and then.
- American Capital (AGNC -5.8%), Armour (ARR -7.5%), Apollo (AMTG -4.9%), Ellington (EARN -4.8%), Anworth (ANH -5.5%), Western Asset (WMC -5.7%), Arlington Asset (AI -4.7%), Dynex (DX -5.1%), Newcastle (NCT -2.3%).
- Mentioned before as starting to look very cheap, Annaly (NLY -4.9%) losses deepen with the stock at $10.72 - its lowest price since 2001 (the dividend fell to $0.25 at the end of 2000 before rising to $0.68 by the start of 2002).
- Tumbling income funds include (KFN -2%), and (PTY -2.1%).
- Among equity REITs, Realty Income (O -1.8%), Medical Properties (MPW -2.4%), and Simon Property Group (SPG -1%) lead down, but HCP (HCP +0.6%) remains green.
ARR vs. ETF Alternatives
ARMOUR Residential REIT Inc invests in and manages a leveraged portfolio of residential mortgage backed securities. The Company is externally managed by ARMOUR Residential Management LLC, pursuant to a management agreement.
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