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10% Yields Created By Hectic Market, Preferred Shares Offer Huge Discounts

Published Thu, 19 Mar 2020 07:00:00 -0400 on Seeking Alpha

The market has everyone scrambling.
We’ve continually been able to find deals that are outperforming the market.
We believe preferred shares are offering some of the best deals out there right now.
This research report was produced by The REIT Forum with assistance from Big Dog Investments.
It has been a very hectic week for preferred shares and Friday was no exception.

Friday and Thursday were the two most exciting days of the week. On Thursday, the entire sector plunged. On Friday, many of the shares bounced back, but a few declined even further.
For investors who are concerned that they may be missing something “the market” understands, Friday’s charts should ease your mind.
A quick note to readers
We are working seven days a week trying to cover everything going on for The REIT Forum. We also are trying to get enough material out to the public. Even though the market is continuing to see record-level volatility, we will continue to bring you our thoughts on the market as this all unfolds. We appreciate your patience as we are constantly adjusting for the absurd volatility in intraday share prices.
Irrational Market in Friday’s Chart
If mortgage REITs are all doomed, as Thursday’s market price predicted, how can the preferred shares soar like this on Friday?

Source: The REIT Forum
Now a reasonable investor who still wants to believe that the market is being efficient could argue:
“A major threat might have cleared up Thursday evening or during the day on Friday!”
Allow the market to reject that notion. The first chart covered preferred shares which rallied by more than 4%. The next chart is preferred shares which rallied less than 4%:

Source: The REIT Forum
There’s not a reasonable argument for claiming that the market was efficient Thursday and efficient Friday. Looking at the relative changes, it's very hard to argue that the market was remotely efficient.
To contrast... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
CHERRY HILL MORTGAGE INVESTMENT 13.52   0.0 -3.91 1.60 14.40
ANNALY CAPITAL MANAGEMENT 8.60   0.0 -3.32 1.20 14.00
ANWORTH MORTGAGE ASSET 3.39   0.0 -0.98 0.44 13.17
NEW YORK MORTGAGE TRUST 6.14   12.0 0.51 0.80 12.74
AMERICAN CAPITAL AGENCY 15.64   0.0 -1.54 1.92 12.21
DYNEX CAPITAL 15.16   0.0 -10.26 1.80 12.06
TWO HARBORS INVESTMENT 13.28   0.0 -2.81 1.60 12.02
INVESCO MORTGAGE CAPITAL 15.18   0.0 -1.01 1.80 11.80
MFA FINANCIAL 7.39   10.4 0.71 0.80 10.81
CAPSTEAD MORTGAGE 7.41   0.0 -0.86 0.48 6.58