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Mortgage REITs Rip Higher


  • We’ve been telling investors for the last 2 months that price-to-book ratios were too good (too low) to last.
  • We’ve included tables to reflect the discounts to trailing book value. The subscriber series uses current estimates for book value, which results in different ratios.
  • We’re including a few recent ratings along with the index cards for those REITs. The estimated book value within the index cards uses current (as of this week) estimates.
  • We’re still bullish on NLY, NRZ, ANH, AI, and AGNCP.
  • Looking for a portfolio of ideas like this one? Members of The REIT Forum get exclusive access to our model portfolio. Get started today »

This research report was produced byThe REIT Forum with assistance from Big Dog Investments.

Your feedback has improved this series week after week. Thank you, readers, for all you do.

Due to the dramatically higher than usual volatility in the sector, we’re planning to post this series a little more frequently than normal. That allows us to provide more ratings and ensure readers of our public work still have recent numbers.

The topics we discuss are going to be extremely relevant to the residential mortgage REITs. The table below uses BV as of Q1 2020 (if the company has reported earnings):



Company Name


Price to Trailing BV

BV Q1 2020




Orchid Island Capital







American Capital Agency Corp.







Annaly Capital Management







Dynex Capital







Capstead Mortgage Corporation







ARMOUR Residential REIT







Two Harbors Investment Corp.







Cherry Hill Mortgage Investment







Arlington Asset Investment Corporation







Chimera Investment Corporation







Ellington Financial







Western Asset Mortgage Capital Corp.







Anworth Mortgage Asset Corporation







Invesco Mortgage Capital





MFA Financial





AG Mortgage Investment Trust, Inc.





PennyMac Mortgage Investment Trust







New Residential Investment Corp.








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This article was written by

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Colorado Wealth Management is a REIT specialist who began his decades-long investment career in a family-owned realtor office before launching his own company and embracing his drive for deep-dive REIT analysis. He passed all 3 CFA exams. He focuses on Equity REITs, Mortgage REITs, and preferred shares.

Features of the group include: Exclusive REIT focus analysis, proprietary charts and data models, real-time trade alerts posted multiple times a month, multiple subscriber-only portfolios, and access to the service's team of analysts and support staff for dialogue and questions on the REIT space.

Analyst’s Disclosure: I am/we are long AIC, IVR-C, NLY-F, NLY-I, AGNCO, MFO, NYMTM, ANH-C, NYMTN, TWO-B, MFA-C, ANH, NRZ, CIM, NLY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (77)

Gary Stern profile picture
So tempted to double down on NYMT. If they reinstate the divvy there's 35% on the upside and a 10% yield. Management didn't panic when the storm started and they calmly made moves to solidify their position. Bash away, perhaps I took my Pollyanna Pills by mistake instead of the antianxiety meds.
If the risk is acceptable to you, then by all means go for it. It seems they'll survive. Preferreds are safer, but with less risk comes less reward. If you did your research and like it, don't let anyone talk you out of it!
pauldr77 profile picture
Still some opportunities to trade the preferred shares, too. Recently switched out of TWO-B and back into TWO-A, Since switching from the A shares to the B, back in mid-May, the A shares rallied 13.7%, B shares 18.2%. I switched back from B to A shares on June 3. At the purchase price, the A shares had a higher yield plus the one quarter of float yield(based on current LIBOR - is there really anyone who can accurately predict what the 3-mo. rates on LIBOR will be, 7 years from now?), before B shares begin floating. There just aren't as many variables to consider when doing this, and while it's not entirely necessary, it's a good idea to try to do the switching within the same company's preferreds. Some preferred shares within a given company's series are not priced efficiently relative to one another at times, but you need to exercise some patience. Fairly simple math, but have to look for the correct opportunities to come around.
MFA up about 30 percent but still owes over $2 billion forbearance and they're in the third 30 day agreed forbearance period. It makes no sense.
Colorado Wealth Management Fund profile picture
Market isn't waiting for the all clear, it is evaluating the change.
Can anyone explain IVR's giant surge? That seems to make no sense, either.
IVR stock jumps $3+ but the 06/19 $4 puts are at about the same price as Friday close. Hard to borrow short too. Trying to figure out an efficient way to play this.
Colorado Wealth Management Fund profile picture
Today was quite the day in mortgage REITs. I'll try to have some quick updates posted over the weekend.
augmented reality profile picture
@Colorado Wealth Management Fund thanks CIM, ARR, NLY up only AGNC down etc...
kbaba profile picture
A sold all my AGNC and a fraction of my AGNC preferreds today, based only on the price run-up closer to BV and expectation that the market comes crashing back down
NV_GARY profile picture
Will need to wait for an update to the 5wk old NAVs.
MREITs rock and rolling this Friday AM
Dump those junks and buy mall equity REITs
Great article!

Is IVR about to do a secondary or something? Can't believe BV for IVR has recovered THAT much, if not, it's trading way overpriced.
Colorado Wealth Management Fund profile picture
I wonder. They have so much non public info, I don't see how they could go a secondary without revealing it. If they reveal it, what happens to the price? What will underwriters agree to pay? It starts to get pretty complex. I think the would like to issue new equity to stabilize. They don't want their cash flow to dry up.
Any ideas why IVR is one of the leaders? Given the company provided recent book value estimates and the fact they are heavy commercial, I can't see why they are trading in tandem to the other companies in the sector. Any chance their assets really increased more than $1 in book value over the past month? Were they able to purchase assets that increased in value after the liquidity issues resolved?
@Colorado Wealth Management Fund Thanks for another very useful article. I love the box, "maximum amount for a buy and hold investor".
SaltyDog62 profile picture
Just calculated gains on $NRZ and $NRZ-PB, 51.2% 100% respectively.

Have more dry powder, but waiting broad pullback, this market has rallied too fast, too high.
They've all crashed back down overnight?
Fortunate One profile picture
CHMI. and Chmi prefs. Still a buy at 9.25. Book should be well over 14. Looks cheaper than most. Appreciate your/Scotts thoughts here. Advanced thanks.
Colorado Wealth Management Fund profile picture
Thanks. Still bullish on CHMI. Huge rally already, but still has a bit of room to run.
Rowbearto profile picture
UP 30% so far on CIM and collecting nice divs. on a lot of the risk 1 prefs.. Nice to with a service that hits singles, doubles, triples and home runs consistently. My best win after 40 years of investing was finding Colorado Wealth Management. @Colorado Wealth Management Fund
Colorado Wealth Management Fund profile picture
Thank you. Happy to help you find those opportunities. All can do is locate them, analyze, and open my position. You're still pulling the trigger to build your wealth. Some investors didn't have the courage to buy during the panic. You earned those gains.
Still not seeing anything for a div announcement on CIM... Has me a bit worried here
augmented reality profile picture
I agree I emailed IR - no response
I saw that AGNCP paid only 0.2722 in April. That is different from your chart. Is there a reason for the difference?
Rowbearto profile picture
It was a new preferred and had a partial first quarter div.
UndiversifyBC profile picture
While I generally feel pretty good about agency mReits, might want to take some caution in a historical book value basis through the entire sector. Especially if you care about what you actually own.

Problem is book value is highly dependent on asset values. Actual asset values can be substantially different than those showing up on historical balance sheets. Has been seen that assets can currently be worth a lot less than past booked in tough economic times. Thus the higher amount of credit risk assets held, the greater possible discrepancies between current operational book versus past stated book.

Maybe this risk isn't much with 100% agency but could rise working way down the food chain toward lowest credits. Realize no one wants to think about such things in this giddy "all clear" environment. But probably better to know risks and choose to ignore rather than be totally blindsided if a risk does happen to materialize.
Colorado Wealth Management Fund profile picture
Did you catch the part about Scott revaluing the assets and hedges on a weekly basis to generate updated estimates? That's a critical part of the process.
UndiversifyBC profile picture
I'm sure Scott's analysis is very helpful. But it still has to be hard to know exactly how CIMs subprime stuff or others direct lending and like assets are really performing on a current basis. Even non agency mbs current market prices may not be that accurate to underlying performance.

Kudos for at least making the adjustments. But it is very tough to know what's going on with weak credits in a tough economic environment.
Colorado Wealth Management Fund profile picture
Agreed. Very difficult. Love having Scott to do it.
Philip Mause profile picture
Why do you consider AI high risk? As I understand it, AI is all agency, has very low leverage and traders at a huge discount to estimated BY.
Colorado Wealth Management Fund profile picture
Many investors have a few misconceptions about AI. I don't want to go into them all here. Risk levels are higher than people think.
Historically bad management team. Also, low leverage means less risk but also less reward. They have baby bonds and preferreds to pay first before common. It’s agency, but it doesn’t deserve to be near book value like ORC AGNC DX etc.
Couldn't believe my eyes staring at MFA and NYMT (1,000 shares each) a couple hours ago. 1K unrealized profit in one day on an investment of 4K. Those two are the dogs of the mREIT space and not exactly favored by The REIT Forum, either.
Colorado Wealth Management Fund profile picture
We had buy ratings on both due to the discount to current estimated book...

How do you figure "not exactly favored"?

We publicly posted a strong buy on NYMT with the last week or two... It is in an article just like this.
At this very moment MFA and NYMT are up another 14% and 17% respectively. Thanks for your great mREIT coverage. You're right, my "not exactly favored" was too negative. Let's say, these two mREITs were not your first choice, but fortunately (so far) mine :D
Monergist profile picture
Nice article. Liked especially the comment about bears not buying because the price is too low. Doubled down on CIM and opened positions in AGNC and BRMK early April.
Colorado Wealth Management Fund profile picture
Nicely done. Huge profits to you.
Still don't understand why AI has such a large NAV discount. Mostly Agencies.
Colorado Wealth Management Fund profile picture
History of bad decision making in the C suite.
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