Quote & Headlines
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Business Wire (Nov 5, 2013)
Business Wire (Nov 4, 2013)
Two Harbors Investment Corp. Announces Earnings Release and Conference Call for Third Quarter 2013 Financial ResultsBusiness Wire (Oct 15, 2013)
Business Wire (Oct 14, 2013)
Business Wire (Oct 10, 2013)
Business Wire (Sep 23, 2013)
Two Harbors Investment Corp. to Present at the JMP Securities Financial Services and Real Estate ConferenceBusiness Wire (Sep 18, 2013)
at CNBC.com (Sep 11, 2013)
Business Wire (Sep 11, 2013)
Business Wire (Aug 29, 2013)
Business Wire (Aug 6, 2013)
at MarketWatch.com (Jul 27, 2013)
at MarketWatch.com (Jun 14, 2013)
Business Wire (Jun 13, 2013)
Business Wire (May 23, 2013)
Business Wire (May 16, 2013)
Business Wire (May 7, 2013)
Business Wire (May 6, 2013)
Business Wire (May 2, 2013)
at CNBC.com (Sep 11, 2013)
at MarketWatch.com (Jul 27, 2013)
at MarketWatch.com (Jun 14, 2013)
at CNBC.com (Apr 8, 2013)
at CNBC.com (Mar 21, 2013)
TWO vs. ETF Alternatives
Tuesday, Dec 105:33 PMGundlach reiterates bullish MBS call
Tuesday, Dec 105:33 PM| 3 Comments
- Rising interest rates have killed refinancing - eliminating prepayment risk - and home prices continue to move higher, a particularly bullish cocktail for non-agency MBS, says Gundlach (DBL, DSL), who finds those securities vastly more attractive than high-yield paper (HYG, JNK).
- Asked about Annaly (NLY) - an owner of agency MBS - Gundlach says he likes it and likes its management, but won't be buyer until after the dividend is cut to something more in line with what core earnings might be.
- "Something for Nothing" slides and webcast
- Non-agency MBS players include: MTGE, MFA, DX, TWO
- Related mREIT ETFs: REM, MORT, MORL
- High-yield ETFs: HYG, JNK, HYS, HYLD, SJNK, PHB, SJB, ANGL, XOVR, UJB, QLTC, SHYG
- Previous: "Freaking out" about interest rate risk
Thursday, Dec 58:14 AMTwo Harbors started a Neutral at Goldman
Thursday, Dec 58:14 AM| Comment!
- In a rising rate environment, a hybrid mREIT like TWO "has better prospects to maintain its book value and dividend due to its nonagency exposure and potential for MSR acquisitions," says analyst David Beardsley, starting at Neutral with $9 price target.
- Previous: Agency players American Capital and Annaly are started at Sell.
Saturday, Nov 309:42 AMGundlach: Time to buy interest rate risk
Saturday, Nov 309:42 AM| 60 Comments
- "People are absolutely freaking out about interest-rate risk," says Jeff Gundlach, sitting down with Robert Shiller to size up the investment landscape. Ever the contrarian, Gundlach suggests last year's 1.4% low in the 10-year Treasury yield could still get taken out. The catalyst? "You never know until after the fact; otherwise, it would be priced in the market. But there is no inflation."
- The see "freaking out" in a picture, check out the price charts of the mortgage REITs, particularly the two proxies for riding the long end of the curve - Annaly (NLY) and American Capital Agency (AGNC). Gundlach: "You can take advantage of pockets of opportunity in what people don't want ... If you're willing to take the interest-rate [risk], you can get yields of 11% in the agency mortgage market."
- Constructive on housing (but not homebuilders), Gundlach is also bullish on non-agency mortgage paper, calling it the cheapest sector in fixed income on a risk-adjusted basis. Fans of also beaten-up non-agency mREITs like American Capital Mortgage (MTGE), MFA Financial, Dynex (DX), and Two Harbors (TWO) may want to take notice.
- Mortgage REIT ETFs: REM, MORT, MORL
- Long-duration Treasury ETFs: TBT, TLT, TMV, TBF, EDV, TTT, TMF, TLH, ZROZ, SBND, DLBS, VGLT, UBT, TLO, LBND, TENZ, TYBS, DLBL
Tuesday, Nov 261:54 PMAnnaly leads more declines in mREITs
Tuesday, Nov 261:54 PM| 44 Comments
- At what point do you just liquidate the portfolio? Habits die hard and traders used to hitting the sell button on the mREITs (REM -0.5%) are doing so again today even as interest rates slide a bit.
- Hitting another multi-year low today, Annaly (NLY -1.3%) - with a portfolio of very liquid assets heavily hedged against rising rates - is now selling for 20% less than September 30's reported book value.
- American Capital Agency (AGNC -0.8%) - with an equally liquid hedged portfolio - is also at about a 20% discount. Previous: CIO Kain promises to continue buybacks at this discounted level.
- Other agency players: Hatteras (HTS -1%), CYS (CYS -1.4%), Capstead (CMO -1%).
- Non-agency mREITs are slipping as well - even as Case-Shiller reports continued solid gains in home prices (which should boost portfolio values). Two Harbors (TWO -1.5%), MFA (MFA -1.4%), Western Asset (WMC -1.1%).
- ETFs: MORT, MORL
Friday, Nov 223:11 PMMortgage REITs continue to slide
Friday, Nov 223:11 PM| 8 Comments
- A nice backup in rates (the 10-year Treasury yield is off 4 bps to 2.75%) is of no help to the mortgage REITs (REM -0.3%), with sector kingpins Annaly (NLY -1.4%) and American Capital Agency (AGNC -1.2%) both hunkered down (NLY earnings call, AGNC earnings call) for the Fed taper, and both hitting 52-week lows today.
- Earlier this week, AGNC and MTGE CIO Gary Kain took his case all the way to Asia at the Citi financial services conference in Hong Kong (transcript). Yes, book value has been hit by higher rates, but also by how much the market is willing to pay for it. Whereas AGNC traded at an average of 110%-120% of book over the past 4-5 years, it's now at sub-90%.
- Discounts can last for awhile, he admits, but also reminds this isn't some opaque bank balance sheet, but instead an easily valued, highly liquid portfolio of assets trading at $0.85-$0.90 on the dollar. As long as it persists, American Capital will continue selling MBS for $1 and buying back stock at a discount.
- Previous: Kain makes a similar case
- Related ETFs: MORT, MORL
- Other sector stocks: Armour (ARR), Two Harbors (TWO -0.8%), CYS (CYS +0.1%), AG Mortgage (MITT -0.5%)
Friday, Nov 81:12 PMSterne Agee: Investors need to reset expectations for mortgage business
Friday, Nov 81:12 PM| 9 Comments
- "We have two takeaways from the quarter and both are negative," says Sterne Agee of the mortgage finance and servicing sector:
- 1) The land grab is coming to an end, i.e. the easy money (for servicers) from buying MSRs being unloaded by the banks is about done. While regulators want more MSRs out of the banking system, this must be balanced against the GSEs which may be slowing down the approval process as they question the transfer of servicing rights from banks to nonbanks.
- 2) HARP margins are down more than expected and the pipeline of future volumes is slowing.
- Already taking a hit amid disappointing earnings were OCN, NSM, WAC, PMT, WD, and NRZ. "We think it will take two to five days for investors to readjust to the quarter's disappointing news and then investors will need to take a more realistic, long-term view," says the team, which, nevertheless, upgrades Two Harbors (TWO -2.7%) to Buy because of its new mortgage servicing investment.
- Also of interest are the single-family rental shops, SBY, AMH, ARPI amid Blackstone's successful rental securitization. High leverage combined with this new low cost of funds could make for some "exceptionally high" return on equity.
Wednesday, Nov 69:48 AMTwo Harbors management excited about entry into MSRs
Wednesday, Nov 69:48 AM| 1 Comment
- Like American Capital Mortgage, Two Harbors (TWO +1%) is getting into the mortgage servicing business, having announced earlier this week a flow sale agreement with PHH Mortgage. On the earnings call, management says it's in "advanced discussions" with sellers which are likely to shortly result in substantial additional MSR investments.
- Webcast, presentation slides.
- Also, like American Capital Mortgage, management notes MSRs are a natural hedge - their value increases as interest rates rise thanks to slower prepayments.
- In another new business line, the company completed a prime jumbo securitization, its first using the company's own depositor. Two Harbors continues to make progress in creating its own originator network. The pricing in this business isn't inspiring for now, allows management, noting this is more a long-term play to profit as GSE reform moves forward.
- Previous Two Harbors earnings coverage.
Tuesday, Nov 54:22 PMTwo Harbors core earnings decline in Q3
Tuesday, Nov 54:22 PM| 2 Comments
- Core earnings per share of $0.19 vs. $0.21 in Q2. Dividend is $0.28 per share.
- Book value of $10.35 per share slips from $10.47 at end of Q2 and compares to today's close $9.22, putting the shares at a 10.9% discount to book.
- Aggregate yield of 4% in RMBS portfolio driven by non-agency holdings which generated 9% yield. Net interest spread of 2.8% is up 30 bps from Q2.
- Portfolio size of $12.9B, with agency holdings making up 75%, non-agency 23%. Fixed-rate securities make up 70.9% of portfolio, the rest are in adjustables. Portfolio size at end of Q2 was $15.1B.
- Repurchased 1.45M shares at average price of $9.23 each.
- CC tomorrow at 9 ET at which the new MSR deal with PHH Corp. will be discussed.
- Q3 results, press release.
- TWO -0.2% AH.
Tuesday, Nov 54:09 PM
Monday, Nov 48:44 AMTwo Harbors boosts mortgage servicing operations
Monday, Nov 48:44 AM| Comment!
- Two Harbors' (TWO) Matrix Financial inks a flow sale deal with PHH Mortgage (PHH) in which PHH may sell to Matrix the mortgage servicing rights on 50% or more of eligible newly-originated residential mortgages. The agreement has an initial 2-year time frame. PHH will act as subservicer on the loans and receive the fees for that.
- Two Harbors expects to discuss the deal in more detail on its quarterly earnings call on Wednesday.
- Press release.
Tuesday, Oct 293:23 PMTwo sell-siders offer tepid defense of American Capital
Tuesday, Oct 293:23 PM| Comment!
- "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%).
Tuesday, Oct 812:09 PMCredit Suisse constructive on mREITs
Tuesday, Oct 812:09 PM| 4 Comments
- Total economic return for mREITs (REM -0.9%) should be positive over the next year, says Credit Suisse, with hybrid/non-agency names faring better than their agency MBS cousins thanks to an expected continued rise in long-term interest rates.
- The team continues to favor two names with less interest rate risk - Two Harbors (TWO -0.8%) and Ellington Financial (EFC -0.4%), as well as those lumped in with mREITs but not really so - Newcastle Investment (NCT -1%), New Residential (NRZ -0.6%), and PennyMac Mortgage (PMT -1.4%).
- Management willingness to buy back shares trading below book value coupled with an ability to protect book value will be the "differentiator of valuation within the group," says Credit Suisse, noting the aggressive repurchases of Gary Kain's AGNC and MTGE.
- Related ETFs: MORT, MORL.
Thursday, Sep 267:54 AMAmerican Capital and Two Harbors coverage started at JPMorgan
Thursday, Sep 267:54 AM| 7 Comments
- JPMorgan initiates coverage on two mREITs, starting Two Harbors (TWO) at a Buy with $10.50 price target and American Capital Agency (AGNC) at Hold with $22 price target.
- Two Harbors, of course, invests in a wider variety of assets and has a good deal of exposure to credit, rather than rates. American Capital, on the other hand, is strictly an agency MBS player.
- AGNC is off 2.5% premarket, but it's just one trade for 102 shares.
Tuesday, Sep 242:45 PMNon-agency REITS the way to go, says Maxim
Tuesday, Sep 242:45 PM| 16 Comments
- 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.
Wednesday, Sep 182:29 PMMortgage REITs lead the no taper party
Wednesday, Sep 182:29 PM| 24 Comments
- 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.
Monday, Sep 168:48 AMMortgage REITs on the move as Summers pulls out of Fed running
Monday, Sep 168:48 AM| 4 Comments
- 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.