Shares of home mortgage real estate investment trusts climbed Tuesday amid a broader market rally and after a Stifel Nicolaus & Co. analyst maintained his "Buy" rating on four REITs.
In a client note Tuesday, analyst Jerry Schluderberg said he believes conditions are starting to stabilize for agency mortgage REITs and reiterated his "Buy" rating on Anworth Mortgage Asset Corp., Capstead Mortgage Corp., MFA Mortgage Investment Inc. and Annaly Capital Management Inc.
Schluderberg also lowered earning estimates for all four, reflecting lower leverage at the REITs.
"Our overall conclusion remains that liquidity risk for the agency REITs is low, current economics are extremely strong, and that the group as a whole remains very attractive," he wrote.
The stock of Anworth, based in Santa Monica, Calif., increased 30 cents, or 4.9 percent to $6.43, while shares of New York-based Annaly Capital gained 78 cents, or 5.1 percent to $16.11. Shares of MFA, headquartered in New York, soared 63 cents, or 10 percent, to $6.92.
In a separate note, RBC Capital Markets analyst Jason Arnold also lowered earnings estimates for Capstead to reflect its debt reduction following the recent $760 million sale of mortgage-backed securities. The analyst maintained his "Outperform" rating on the stock, saying the REIT is "an attractive low credit risk investment."
"Despite funding challenges, our expectations for further Fed rate cuts should lead to meaningful earnings and dividend expansion at CMO in 2008," Arnold wrote.
Shares of Dallas-based Capstead jumped 75 cents, or 6.6 percent, to $12.15 in late morning trading.
The notes follow news that UBS AG and Deutsche Bank AG are expecting billions of dollars in write-downs. But the broader markets bounced back in late morning trading after the Swiss bank and Lehman Brothers Holdings Inc. issued new stock to boost their balance sheets.
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