Posts from the ‘New Residential (NRZ)’ Category

Nov 23

Thoughts about my investment in New Residential’s and a look at their MSR Pools

New Residential has performed poorly over the last few weeks. Pretty much since the release of their 3rd quarter results, the stock has tumbled. As I mentioned in my previous post, I think that this move in unwarranted, and I have added to my position significantly at and below $6.

I suspect that the market is lumping in New Residential with all the other mREITs. They are being compared on standard book value metrics and New Residential trades at a significant premium to its book value (20%) while most other REITs trade at a discount to it.

I wouldn’t be surprised if there are algorithms picking up on the book value discrepancy and automatically shorting the higher price to book companies against longs on the lower ones. It would seem like a natural trade – short what is expensive, go long what is cheap, and look for opportunities where the dividend of the long exceeds that of the short. Read more

Nov 11

10 Comments

Week 123: Lot’s of Volatility

Portfolio Performance

See the end of the post for the current make up of my portfolio and the last four weeks of trades.

Recent Developments

The third quarter earnings season is shaping up a lot like the second. Lots of volatility, lots of disappointment, and dramatic falls followed by recoveries.

I think its a symptom of our malaise. Things just aren’t that good. Yet stocks are juiced by all the money sloshing around. So you get this dynamic during earnings where numbers come out and aren’t that good, which leads to a steep sell-off in the stock because the current price can’t be justified based on the earnings and outlook. But then the liquidity effect kicks in, arresting the decline, changing the momentum on its head, and sending the stock back up. Read more

Jun 26

16 Comments

Taking Advantage of the REIT Sell-off

For some time now I have wanted to take advantage of companies that will benefit from improving credit conditions. Yet since the beginning of the year the steep run-up in these stocks has led me to limit my purchases to a small position in Arbor Realty (ABR) and a short lived position in RAIT Financial (RAS).

Thus I am pleased that we are finally seeing a significant correction in these names. The correction is being brought about by the rise in interest rates, a pullback in the credit markets (here and here), my interpretation of which is that it has been driven by a temporary oversupply and of course fears of the Fed, and investors inability to distinguish between more unconventional REIT structures that are not sensitive to increases in interest rates and simple agency and non-agency mortgage REITs that are. The companies that I am interested in are mostly agnostic to interest rate increases and in some cases will actually benefit from a rise in rates, but that hasn’t stopped them from selling off.

In the last three weeks I have taken advantage of the sell-off by buying shares in the following names: