It's been a rough and tumble season for mortgage REITs as QE3 taper fears and rising interest rates ravage the sector. Nearly every mREIT has seen damage to earnings and book value since May, when agency-only giant American Capital Agency (NASDAQ:AGNC) upset the apple cart by posting a first-quarter loss in both areas. As the Federal Reserve became more open about discussing a possible end to its bond-buying spree a little later in the month, turmoil in the sector has become the norm.
Investors engage in a little shopping
As stock values drop, insiders at several trusts have been busy snapping up shares at bargain-basement prices. In late July, American Capital Agency's CIO Gary Kain bought 25,000 shares at a $10 per-share discount to what CEO Malon Wilkus paid in February. On August 1, Kain also purchased the same number of shares of American Capital Mortgage(NASDAQ:MTGE), the hybrid mREIT also under Kain's purview. The discount per share on that transaction, compared with Wilkus' purchase earlier in the year, was over $6 per share.
At Hatteras Financial(UNKNOWN:HTS.DL), CEO Michael Hough and COO Benjamin Hough each bought at least 12,000 shares at the end of July, after that company's stock value fell almost $6 from the end of May. Likewise, CEO Richard King of Invesco Mortgage(NYSE:IVR) did some bargain buying on August 5, purchasing 6,500 shares at a savings of $4.50 each, compared to his previous buy in mid-May.
Just last week, two more mortgage REITs saw some action, with CYS Investments' (NYSE:CYS) CEO Kevin Grant purchasing over 34,000 shares of his trust, saving nearly $3.50 per share over his previous transaction in late May.
The granddaddy of all share purchases, however, occurred at Annaly Capital (NYSE:NLY), when CEO Wellington Denahan bought almost 182,000 shares over a two-day period last week.
For investors, it's a newsworthy event
While many investors were running screaming toward the mREIT exits, officers of these trusts were buying stock in their own companies, taking advantage of the price dip. Most investors know that insiders buying stock is considered a good thing, and worth paying attention to. Investors are often comforted by such activity -- and, considering how Annaly's and CYS' stock values rose after the transactions, they were apparently feeling more serene than they had in a while.
Although the entire sector rallied as well, times are still troubled for mREITs. Taper terror will likely begin anew after Labor Day, as investors and analysts anxiously await the next Federal Open Market Committee Meeting, which takes place on September 17 and 18.
Considering that most analysts now expect tapering to start soon -- possibly, even, next month -- the timing of the CYS and Annaly purchases carry more weight than usual. Despite the likely turmoil that mREITs will suffer during the unwinding of QE3, these managers are letting investors know that the trusts will, in fact, weather the storm. During these times of market turbulence and investor jitters, it's a timely reminder.