Weekly Series: mREIT And BDC Recommendations (And Price Targets) As Of 07/14/2023

Summary points:

• BDCs NAVs up ever so slightly. Prices were up a bit more. Several downgrades as many prices happened to move just past target points.

• Several mREITs saw gains in share price and book value. Those with lower-coupon MBS (higher duration) and shorter hedges (less negative duration) saw bigger BV gains.

• Price gains were clearly larger on average than BV gains. That weakened the risk/reward profile a bit.

• Scott and I (Michael A.K.A. CWMF) both picked the week as a good opportunity to exit our positions in DX.

• Yields declined during the week and investors showed a greater interest in assets across the board.

Note: This article opens with a quick recap of roles and what you’ll find here. If you’re familiar with it, just scroll down to the heading “New Commentary and Images Begin”.

CWMF’s Introduction

Hi subscribers.

Within the “New Commentary and Images” section, you’ll find brief summaries of what happened for fundamentals over the last week. Then you’ll find charts and tables covering all the major developments.

This article is a joint effort between CWMF and Scott Kennedy.

Who Does What?

Scott provides full coverage for:

• 20 Mortgage REIT common stocks

• 15 BDC common stocks

For each stock that includes:

• Research and data

• Modeling projected book values / net asset values (BV/NAV)

• Setting common stock recommendation ranges (targets / ratings)

• Answering a few questions on the stocks

Colorado (“CO” / “CWMF”) Wealth Management Fund provides coverage on:

• Equity REIT common stocks

• Mortgage REIT preferred stocks

• Introductory articles for relevant concepts

• Macroeconomic trends

Layout

The rest of this article is split into two major categories:

1. New commentary & images for this week. (Pretty fast)

2. Repeated sections (linked for the moment, as we revise the method for including them).

You’ll know you’ve hit the repeated section. It has a pretty obvious image. With that said. Let’s get into the article.

New Commentary and Images Begin

A Few Notes from Scott:

Positions: Sold my DX position (was a very small portion of the portfolio overall).

BDC Weekly Change: Similar to the prior couple of weeks, NAVs relatively unchanged - slightly increased. Spreads continued to slightly tighten.

Other Comments: Continuing the June 2023 trend,market remains “cautiously optimistic” on high yield debt/speculative-grade credit. Spreads remain resilient.

Underlying Portfolio Company Credit Changes Held by BDCs (Weekly): 1 upgrade (ORCC previous troubled portfolio company) and 1 downgrade (PSEC).

Underlying Portfolio Company Credit Changes Held by BDCs (Current Quarter-to-Date):

This is a running tally of the credit upgrades and downgrades for companies held by each BDC.

MAIN: 1 Up

PSEC: 1 Up, (1) Down

ORCC: 1 Up

Underlying Portfolio Company Credit Changes Held by BDCs (Prior Quarter):