We’re getting a dip in the mortgage REIT sector. We saw a quick one that was corrected recently, but this one moved quite a bit lower. The sector was expensive prior to the start of the dip, so some weakness isn’t surprising. This is an opportunity to start building positions again. We don’t advocate going all in. We’re still keeping a healthy chunk of cash on hand so we have flexibility to continue raising positions. Weakness is driven by a flattening of the curve, which hurts sentiment, and volatility (mainly down) in long-term rates, which hurts value. Not all declines in rates are challenging. The only challenge here is the rate of change.
Let’s talk about New Residential (NRZ) briefly. We’ve purchased NRZ a few times lately. Shares are offering a nice bargain. There’s a healthy discount to projected book value. We’re expecting the mortgage REIT to report a decline in book value for Q2 2021, but even after the projected decline we still see a material discount. Yes, there is still risk, but this is a matter of risk/reward and that picture is favorable.
Source: Seeking Alpha
Related Articles:
New Residential: A Worthy 8.6% Dividend Yield
Posted by D4L | Wednesday, August 11, 2021 | ArticleLinks | 0 comments »________________________________________________________________
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