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Jefferies Thinks 2011 Could Be Bad For Some Mortgage REITs
By Market News Video Staff, Wednesday, January 19, 11:45 AM ET
Mortgage REIT investors received mixed news from Jefferies this morning when the investment firm issued a report on Annaly Capital (NYSE:NLY), MFA Financial (NYSE:MFA) and Hatteras Financial (NYSE:HTS). Starting with the good news, Jefferies upgraded shares of MFA Financial (NYSE:MFA) from hold to buy as the firm expects MFA's non-Agency mortgages to increases in value this year. With the upgrade, the firm raised its price target from $7.50 per share up to $9.00. Based on the current stock price, this represents an upside of about 12.5%, not including the company's 11.8% dividend yield.
And with the good news, comes the bad. Jefferies downgraded shares of Annaly Capital (NYSE:NLY) from buy to hold as investment spreads are expected to tighten this year. As the yield curve flattens and Agency MBS prices fall, maintaining the dividend could prove difficult for Annaly. With the downgrade, Jefferies reduced its price target from $18 per share down to $15. Also downgraded today was Hatteras Financial (NYSE:HTS). Jefferies downgraded the stock from buy to hold as higher capital costs could impact earnings at the company. Based on Hatteras' portfolio, Jefferies expects the portfolio to decrease in value if MBS prices continue lower.
If mortgage REITs begin to fall, the iShares FTSE NAREIT Mortgage Plus Capped Index Fund (AMEX:REM) is sure to follow. The fund holds almost 20% of the portfolio in Annaly stock and another 2.9% in Hatteras Financial. For a complete list of holdings, please visit the REM Holdings page on ETFChannel.com
For a list of ETFs holding HTS, MFA or NLY, visit the following links:
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