Scott Kennedy just scored the bout between FBRT and SACH. This duel was prompted by a poll for our paid members to select the REITs they are most interested in. Following the merger of EFC and AAIC, we had one open spot for coverage. In this duel, Scott will score both REITs on a few critical metrics and select the REIT that makes more sense. This duel was prompted by a poll for our paid members to select the REITs they are most interested in.
The rest of the article is From Scott Kennedy
Hi subscribers, I recently performed a “deep dive” regarding FBRT’s and SACH’s business operations and investment portfolio.
In determining which stock would be the best candidate for full mREIT common stock coverage starting on 1/1/2024, I believe 3 key metrics to compare and contrast are, but not limited to, the following: 1) market capitalization; 2) valuation; and 3) investment portfolio metrics/health/assigned risk rating. As such, let us review these 3 key metrics.
1) Market Capitalization: I believe this is a pretty simple comparison/conclusion. FBRT currently has a market capitalization of $1.2 billion while SACH only has a market capitalization of less than $175 million. When solely considering this metric, FBRT clearly is the safer choice from a market capitalization perspective. This is a pretty simple/general assumption but I wanted to quickly highlight this metric for subscribers.
Market Capitalization Advantage = FBRT
2) Valuation: As most subscribers know by now, when it comes to mREIT common stocks, one of the best indicators of “strict valuation” is comparing an entity’s stock price in relation to its book value. In other words, a company’s price-to-book value. For purposes of this comparison, I am merely comparing each entity’s stock price as of 12/20/2023 to its book value as of 9/30/2023.
As of 9/30/2023, FBRT reported a BV of $15.82 per common share. As of 12/20/2023, FBRT had a stock price of $14.19 per common share. When calculated, FBRT had a discount to the company’s 9/30/2023 BV of ($1.63) per common share or (10.30%). As such, a notable (almost modest) discount. Pretty straightforward.
Regarding SACH’s price-to-book value calculation, there was a bit more “digging” that needed to occur as management does not provide the company’s BV per share in the company’s press release, investor presentation slides, or 10-Q/K report.