Mon, Feb. 3, 10:42 AM
- The poor ISM number and resultant drop in interest rates provides more manna to the rebounding mREITs (REM), with Annaly (NLY +1.7%), Western Asset (WMC +1.9%), CYS (CYS +0.9%), Capstead (CMO +1%), and Ellington (EFC +0.8%), (EARN +0.2%) among those leading the sector this morning.
- Capstead was the first of the mREITs to report Q4 results, but American Capital (AGNC +0.9%), (MTGE -0.1%) reports on Wednesday, and investors will want to see if Gary Kain and team - so worried about higher rates - hedged away any gains to be made from their fast decline thus far this year.
- Related ETFs: MORT, MORL
Tue, Jan. 28, 10:38 AM
- “Banks have made a decision internally that a delinquent borrower is not a core customer,” says Altisource Residential (RESI) chief Ashish Pandey who expects as many as 500K non-performing mortgages to be sold in 2014.
- Altisource is among a number of firms and hedge funds standing to benefit as banks unload into the recovering market. Ellington Management (EFC, EARN) and Starwood Property Trust (STWD) are also targeting the soured loans. "The supply of NPLs is going to be very substantial for the next several years," says Ellington CEO Mike Vranos, whose firm expects transactions this year will exceed last year's $25B.
- Another seller is HUD, which since 2010 has sold 50K non-performing mortgages insured by the FHA and plans more this year. Winners of a December auction were Bayview Financial (backed by BX) and Lew Ranieri's Selene Investment Partners. They paid an average of 52% of the $2.6B in loan balances, or 69% of estimated property values.
Mon, Jan. 13, 3:08 PM
- What might pull the mREIT sector out of its brutal slump? A slide in the broad equity market for one. An out of nowhere 1%-plus dive in the major averages is being felt in the bond market, where the 10-year yield is off another 3 basis points to 2.83%, and mortgage REITs (REM +0.4%) - whose book values have been savaged by the big jump in interest rates since last spring - are responding.
- Annaly (NLY +1.2%), American Capital (AGNC +1.4%), (MTGE +1.1%), Two Harbors (TWO +1.4%), CYS (CYS +1.9%), Western Asset (WMC +1.5%), AG Mortgage (MITT +1.1%), and Ellington Residential (EARN +0.8%) are leading. This just in: Sector giants American Capital Agency and Annaly are ahead 6% and 4% YTD, respectively.
- The iShares 20+ Year Treasury Bond ETF (TLT +0.6%) is up 3.2% for the year.
Wed, Jan. 8, 3:11 PM
- Skeptical about investing in mREITs until maybe another washout from another leg up in interest rates, one trader - eyeing the "sheer cheapness" of the sector and the wholesale selling of stocks with no regard to durations or NAV - can wait no longer. Investors, he/she says, stand to make a low-risk 20-30% over the next 12-24 months - much of it in cash dividends - even if rates do climb to 3.5-4%.
- His/her top pick is Ellington Residential (EARN +0.1%), managed by the same crack team who has been able to preserve book value so well at Ellington Financial (EFC +0.6%). The stock trades at a 16% discount to book, at 6.3x core EPS (earnings from interest, not cap gains), and has about a 5% exposure to higher rates - meaning a 100 bps rise in rates would ding book value by 5%, still putting the stock at just 89% of book.
- Should rates stabilize, the upside is 1x book value. Add in dividends and that's a 32% return in a year.
- Also getting a positive mention for preserving book value in a tough time is MFA Financial
- Related ETFs: REM, MORT, MORL
Dec. 16, 2013, 3:35 PM
- The mortgage REIT sector (REM -0.6%) is lower on a bright green day for the rest of the market, with Anworth Mortgage's (ANH -1.2%) 33% dividend cut Friday night offering another excuse to Sell. Anworth is an agency mortgage player, investing mostly in adjustable mortgages. Anworth's new forward yield of 7.5% is so far out of line with the double digits of the rest of the industry, it suggests even more declines are in store for the stock, or big dividend cuts lie ahead for competitors. At $4.19, Anworth is selling for a near-30% discount to September 30 book value.
- Down the most today is American Capital Mortgage (AGNC -2.7%), and its non-agency cousin, American Capital Agency (MTGE -1.7%) is off sharply as well.
- Others: Annaly (NLY -1.3%), Armour (ARR -1.2%), Western Asset (WMC -1.8%), Apollo (AMTG -1.4%), Ellington (EFC -0.4%), (EARN +0.2%)
- Related ETFs: MORT, MORL
Dec. 12, 2013, 5:51 PM| Comment!
Nov. 13, 2013, 11:15 AM
- The near-indiscriminate selling in mortgage REITs (REM +0.6%) left at least one major bargain as Ellington Residential Mortgage (EARN +10.7%) soars after reporting Q3 core EPS of $0.61 and an increase in book value to $18.80 per share from $18.57 at the end of Q2. This left the stock - prior to today's move - at a whopping 23.7% discount to book.
- The dividend was just $0.50 per share against core earnings of $0.61 - is a special payout coming?
- Ellington Residential is managed by the same crack team which has expertly preserved book value at Ellington Financial (EFC +0.3%), only EFC is a partnership, EARN is a REIT.
- Net interest margin increased 14 bps to 1.77%. The CPR rose to 3.6% from 1.7%.
- Earnings call is just getting underway.
- Press release
- Relevant ETFs: MORT, MORL.
Oct. 29, 2013, 3:23 PM
- "A good quarter, all things considered," says Nomura's Bill Carcache, maintaining his Hold rating and $22 price target on American Capital Agency (AGNC -8.7%) after Q3 results. Carcache seems copacetic with CIO Kain's defensive stance - a view not shared by all, judging by the earnings call and the direction of the stock today.
- KBW, meanwhile, maintains its Buy rating, but cuts the price target to $25.50 from $27. The team sees Kain loosening up on his "fully hedged" stance and lifting earnings power "north of the $0.80 dividend."
- You take what you get when you buy an actively managed mREIT like AGNC, says Nomura. Some quarters are going to be terrific, and others - like Q3 - will have a ton of activity with little to show for it.
- AGNC continues to be a major drag on the sector (REM -3.7%). Other names: Two Harbors (TWO -2.6%), Hatteras (HTS -2.9%), Anworth (ANH -3.8%), Western Asset (WMC -2.6%), Ellington (EFC -1.9%), (EARN -3%), AG Mortgage Investment (MITT -5.1%), Apollo Residential (AMTG -4.9%).
Oct. 1, 2013, 12:49 PM
- Presenting at the JMP Conference (slides) (webcast), Ellington management lays out the differences between its older partnership - Ellington Financial (EFC -0.1%) - and its recently IPOd mREIT Ellington Residential (EARN +0.9%).
- With 15% agency exposure and 85% non-agency, EFC is about credit risk; with 85% agency exposure and 15% non-agency, EARN is about prepayment risk.
- Turning to market commentary, management feels at this moment there's a good deal more upside than downside. Particularly interesting is their conviction (pages 10 and 11) in the value of pool payups. These were destroyed when rates moved higher over the summer, but have barely recovered even as mortgage prices have improved over the past month. Behind the bizarre price action is - what else - the distortions introduced by the Fed's QE. The taper could turn out to be very helpful. "Tremendous declines in prices set you up for very asymmetric risk/reward opportunities."
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. 18, 2013, 12:50 AM| Comment!
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. 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.
Aug. 15, 2013, 11:12 AM
- Anything paying income is again being particularly hard hit by the rise in Treasury yields (the 10-year now at a 2-year high of 2.8%).
- Selections in mREITs (REM -2.1%), (MORT -1.9%) include RAIT Financial Trust (RAS -4.1%) - whose IRT had an ill-timed IPO yesterday and Ellington Residential (EARN -4.8%) - the market not caring about reasonable Q2 performance, a hefty discount to book, and the launch of a repurchase program. Other mREITs: CYS Investments (CYS -3.6%), Apollo (AMTG -3%), Newcastle (NCT -5%), Invesco (IVR -2.7%), Arlington Asset (AI -1.2%). A leveraged ETF play: MORL.
- Hanging in there relatively well are the BDCs: Fifth Street (FSC -1.3%), Triangle (TCAP -1%), MCG (MCGC -1.2%), Hercules (HTGC -1.2%), Ares (ARCC -0.3%).
- BDC ETFs: BDCS, BDCL, BIZD.
- In emerging markets fixed income, a trader takes note of EDD, a closed-end fund now trading at more than a 15% discount to NAV.
- Emerging market bond ETFs: EMB, LEMB, PCY, EMLC, ELD, PFEM, EBND, VWOB.
Aug. 15, 2013, 7:43 AM
- June 30 book value of $18.57 compares to $19.65 on March 31. Much of the decline was due to a widening of spreads, but - going forward - this gives agency MBS a much "higher quality" net interest margin, says the company, as prepayment risk and policy risk are "substantially reduced." Management spent the quarter deploying the vast majority of its IPO proceeds into these better spreads.
- The board authorizes a $10M share repurchase program.
- Earnings call at 11 ET. Press release.
- EARN no trades premarket, but one could expect at least some of the stock's now 15.2% discount to book value to evaporate today.
- EARN is the REIT vehicle run by the managers of Ellington Financial (EFC).
EARN vs. ETF Alternatives
Ellington Residential Mortgage REIT is engaged in acquiring, investing in, and managing residential mortgage and real estate-related assets. It focuses on constructing & actively managing a portfolio comprised mainly of Agency RMBS.
Other News & PR