Weekly Series: mREIT And BDC Recommendations (And Price Targets) As Of 11/26/2023 - Brief Update
Hi subscribers.
We aim to retain the same layout from week to week. The layout is carried over from last week.
Weekly Notes From CWMF
Positions: No purchased or sold positions.
Commentary: This will be an unusual update due to the holiday weekend. Fortunately, there were no major swings for the week.
The 5-year Treasury yield increased from 4.443% to 4.527%. That’s a pretty small move.
Source: MBSLive
Therefore, we would expect slight hedging gains.
The 30-year fixed-rate agency MBS with a 6.0% coupon rate saw a slight dip in value from $99.77 to $99.63 per $100 of face value:
That means a slight dip in asset values.
The gain on hedges and loss on assets should roughly offset. If I’m just eyeballing this, I would predict that the hedging gains are probably a bit bigger. However, the net impact should be quite small.
This is a very rough estimate, but I’d predict the majority of changes to BV would’ve been in the range of +0% to +2%, depending on the hedging structure in place.
Consequently, updated estimates won’t be necessary for this week.
We may roll over the estimate date in the sheet (update from 11/17/2023 to 11/24/2023) just to affirm for readers that we did look at the market, and the prior estimates (and targets) continue to be reasonable. We’ve already updated dates for BDCs but haven’t done it yet for mREITs.
Some REITs changed ratings by having a tiny swing in the share price, but share prices were roughly stable. For instance, ACRE dropped from $10.00 to $9.95. Technically, this put them right at 100% of the “buy under” level. Realistically, $.05 isn’t material. CIM dropped from $5.05 to $5.04. Clearly, this isn’t material. AGNC rallied from $8.70 to $8.71.
I think you get the trend. This time, the changes were too small to be relevant. Because targets are unchanged, I’m going to skip the targets this week and include more of the layout in the free section.
Weekly Notes From Scott
Positions: No purchased or sold positions.
Out of town for Thanksgiving weekend.
Weekly Recommendations
NOTE: This article is usually published Sunday evening or Monday morning. Sometimes it takes a bit longer.
The updates below were live in the spreadsheets by Sunday night, so the delay is just in preparing and posting this article.
The mREITs:
See the Google Sheets.
Those sheets are all linked on this page (paid membership required).
Next week, this image will return.
The BDCs:
See the Google Sheets.
Next week, this image will return.
Please check the Google shared spreadsheets regarding intra-week recommendations, as stock prices fluctuate.
Looking at mREIT and BDC valuations, as a whole, the current ratings breakdown as follows for mREITs:
Note: This counts ACRE as a hold. It could be counted either way as it sits exactly at the target price. Shares dipped from $10.00 a week ago to $9.95 presently.
For BDCs:
One downgrade here. GAIN rallied by 0.5%. That pushed shares just a few pennies into the overvalued range.
Positions
The paid version of this series includes a chart showing our allocation sizes to each investment. The free version includes the disclosure for which shares we own, but not the allocation size:
CWMF is long: RITM-D, GPMT-A, DX-C, EFC-A, MFA-C, RITM-C, EFC-B, PMT-C, PMT-B, CIM-B, AGNCP, CIM-D, RITM, SLRC, MFA, GPMT, RC.
Scott Kennedy is long: RITM, RC, SLRC, GPMT, ARCC, TSLX, FSK, MFA, RITM-D, MITT-B, MITT-C, GAINL, RCB, ECCC, ECCW.
The following charts (for paid members) show position sizes for Scott Kennedy and CWMF as of Friday night: