I tried to add to an already-oversized ANH position today ahead of the conference call that starts an hour after the close.
I have a suspicion that their low leverage and preference for ARMs will serve them better than expected in what was a tough quarter to trade.
Certainly the buyouts by Freddie in March, and the coming buyouts of bad loans by Fannie over the next few months will hit their book value a little, but the market seems to be forgetting that they assumed a faster prepay rate than has actually occurred.
Since the buyout issue is the same as fast prepays from an investor standpoint, the quarter probably had two months of slower prepays than management estimated, and one month faster. In other words, it could be a wash.
They cut their dividend, but only by a penny. In the end-of-year earnings call, Annaly, the big dog in the fight, had told the market that they eschewed the at-risk ARMs so they wouldn’t be hurt too badly byAgency buy-outs. Then they disappointed everybody by cutting their dividend from 75 cents to 65 cents.
That put every other amREIT into a tailspin, since all but one of them were much more heavily concentrated in the troublesome hybrid ARMs than Annaly.
With yesterday’s announcement and conference call by Capstead (CMO) that their book value declined a relatively minor amount (less than the quarterly dividend, which is, after all, a built-in decline in BV), I felt it was safe to buy in front of Anworth’s call.
Unfortunately, I cheaped out, and my bid two cents above the low of the day didn’t get filled.
On the other hand, I tripled my position in CMO today at a good price below book value, so I’m happy with that.
The call is at 5 PM Eastern time, and the dial-in number is 800-860-2442. For those that can’t make it, the replay will be available for a week at 877-344-7529 for U.S. callers (international and Canadian callers should dial 412-317-0088) and the conference number is 440153.
The conference call will also be webcast over the Internet which can be accessed on Anworth’s web site at http://www.anworth.com through the corresponding link located on the home page.
See you on the other side.