Anworth Mortgage Asset • ANH-NYSE
Buy • Price 6.45 on Nov. 1
by B. Riley & Co.
ANH reported third-quarter 2011 earnings per share of 22 cents, two cents and one cent less than Street consensus and our own estimates, respectively. The only material difference between our projections and actual results was a much lower balance of average earning assets. Prepayment speeds and premium amortization expense were well within our expectations. Thus, ANH's net-interest margin was less than one basis point off our Oct. 4 calculation. All other variances, save share count, which did not affect the reported per-share result, were positive. Going forward, then, reductions in our earnings and dividend estimates reflect only smaller-than-originally-projected average-earning asset balances. All other assumptions are essentially unchanged. Even at the new dividend projections, ANH would pay out 82 cents (versus 91 cents previously) over the next 12 months, yielding 13% at current prices. It would also support a price target of $7 (versus $7.50 previously), which is 9% higher than where the stock [was recently] changing hands. Together, the prospective yield and upside bring the total return potential to 22%. If, as we anticipate, elevated levels of prepayments subside next year and rates at the intermediate section and long end of the yield curve stabilize—and perhaps turn up in the second half—Anworth is well positioned for 2012 and beyond. Market cap: $837 million.
Pressure from the GSEs has “definitely stanched the flow of credit to the mortgage market, but we had clearly gone too far,” said Richard Eckert, an analyst in San Francisco at securities firm B. Riley & Co. who wrote research on subprime lenders during the housing boom and then joined a hedge fund betting against property loans during the collapse. “We’ve got to return to some kind of happy balance.”
Continue Reading >Real estate investment trusts that buy U.S. mortgage debt rose, erasing losses that had reached the steepest since December 2008 amid concern that their main source of financing could be roiled by European bank woes…Declines in mortgage REIT’s may have also reflected concern about the companies’ investment opportunities, said Richard Eckert, an analyst at B. Riley & Co.
Continue Reading >B. Riley & Co. analyst Rich Eckert thinks the government “should get out of the way” of the housing market, and discussing the potential effects of mortgage refinancing programs.
Continue Reading >“If the SEC were to regulate [mortgage REITs], to make their strategies unprofitable or unable to generate the necessary returns, they would be stanching a good bit of the flow of private capital to the housing and housing finance markets,” said analyst Rich Eckert of B. Riley & Co., LLC.
He said mortgage REITs can play “an even larger role in the post-Fannie and Freddie world when you are eventually able to privatize the mortgage market. Why would you want to shut these players out?”
Eckert, who covers real-estate companies including American Capital Agency Corp., Anworth Mortgage Asset Corporation and Hatteras Financial Corp., said he does not think the SEC will ultimately remove the exemption for all mortgage REITs.
Continue Reading >For investors who still tremble at the thought of investing in companies that rely on mortgage-backed securities to earn a buck, fear not, says Rich Eckert, an analyst for B. Riley & Co. LLC who initiated coverage of six agency mortgage REITs on Aug. 2. As the former CFO and risk manager of the hedge fund Lahde Capital Management, which shut its doors shortly after making investors a bundle in the subprime mortgage meltdown, Eckert watched the MBS market collapse in 2007 and 2008 but now sees an opportunity for MBS REIT investors, he tells SNL.
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