Author argues mortgage companies and MREITs offer attractive risk-adjusted value due to wide mortgage spreads, favorable policy, falling rates, AI cost cuts, and possible Fed mortgage-bond buying.
RKT — LONG Author argues Rocket Companies benefits as a mortgage company from historically wide mortgage spreads, deregulation, lower capital requirements, falling funding/LT rates, AI cost reductions, and possible Fed mortgage-bond buying. Catalysts include Trump administration policy and potential QE. Stated risk is homeowners may not move due to high mortgage rates, inflation, and labor weakness.
Mortgage spreads are historically wide when corporate spreads (ex ORCL) are tight
LDI — LONG Author argues loanDepot benefits as a mortgage company from historically wide mortgage spreads, deregulation, lower capital requirements, falling rates, AI cost reductions, and possible Fed mortgage-bond buying. Catalysts include Trump administration policy and potential QE. Stated risk is homeowners may not move due to high mortgage rates, inflation, and labor weakness.
Deregulation for mortgages and banking
AGNC — LONG Author argues AGNC Investment Corp. is attractive as an MREIT yielding 12-20%. Falling rates would make the dividend relatively more attractive and higher net interest spreads more profitable. Policy catalysts include deregulation and possible Fed mortgage-bond buying; risk is people may not move due to mortgage rates, inflation, and labor weakness.
MREITs yield 12-20% dividends when rates fall and will look even more attractive on a relative basis. Meanwhile their higher net interest spread will make them more profitable.
NLY — LONG Author argues Annaly Capital Management is attractive as an MREIT yielding 12-20%. Falling rates would make the dividend relatively more attractive and higher net interest spreads more profitable. Policy catalysts include deregulation and possible Fed mortgage-bond buying; risk is people may not move due to mortgage rates, inflation, and labor weakness.
MREITs yield 12-20% dividends when rates fall and will look even more attractive on a relative basis. Meanwhile their higher net interest spread will make them more profitable.
ORC — LONG Author argues Orchid Island Capital is attractive as an MREIT yielding 12-20%. Falling rates would make the dividend relatively more attractive and higher net interest spreads more profitable. Policy catalysts include deregulation and possible Fed mortgage-bond buying; risk is people may not move due to mortgage rates, inflation, and labor weakness.
MREITs yield 12-20% dividends when rates fall and will look even more attractive on a relative basis. Meanwhile their higher net interest spread will make them more profitable.
TWO — LONG Author argues Two Harbors Investment Corp. is attractive as an MREIT yielding 12-20%. Falling rates would make the dividend relatively more attractive and higher net interest spreads more profitable. Policy catalysts include deregulation and possible Fed mortgage-bond buying; risk is people may not move due to mortgage rates, inflation, and labor weakness.
MREITs yield 12-20% dividends when rates fall and will look even more attractive on a relative basis. Meanwhile their higher net interest spread will make them more profitable.
ARR — LONG Author argues ARMOUR Residential REIT is attractive as an MREIT yielding 12-20%. Falling rates would make the dividend relatively more attractive and higher net interest spreads more profitable. Policy catalysts include deregulation and possible Fed mortgage-bond buying; risk is people may not move due to mortgage rates, inflation, and labor weakness.
MREITs yield 12-20% dividends when rates fall and will look even more attractive on a relative basis. Meanwhile their higher net interest spread will make them more profitable.
Unpriced research observations (excluded from Calls and Returns):
UWMC — LONG Author argues UWM Holdings benefits as a mortgage company from historically wide mortgage spreads, deregulation, lower capital requirements, falling rates, AI cost reductions, and possible Fed mortgage-bond buying. Catalysts include Trump administration policy and potential QE. Stated risk is homeowners may not move due to high mortgage rates, inflation, and labor weakness. resolved_entity_name_mismatch
Lower Capital requirements means more lending
DX — LONG Author argues Dynex Capital is attractive as an MREIT yielding 12-20%. Falling rates would make the dividend relatively more attractive and higher net interest spreads more profitable. Policy catalysts include deregulation and possible Fed mortgage-bond buying; risk is people may not move due to mortgage rates, inflation, and labor weakness. resolved_asset_type_mismatch
MREITs yield 12-20% dividends when rates fall and will look even more attractive on a relative basis. Meanwhile their higher net interest spread will make them more profitable.