I’ll Be Listening

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.



3 Responses to I’ll Be Listening

  1. Marcr says:

    Added tiny bit to small CMO, but ANH didn’t look like anybody knew anything so sold half.

    • hhill51 says:

      I tend to notice that their dividend went down less than any of the peers. I think they all speak loudest via their dividends. Anworth is a conservative bunch, so the 27 cent dividend is probably very close to their earnings for the quarter.
      I will feel lucky if the market does the same thing to Anworth that they did to Capstead today. I’ll add some in the taxable account where I have room to take capital gains (another story for another time)… then I can sell the day before it goes ex-dividend next quarter.

      • hhill51 says:

        OK — 27 cents income, book value $7.40 (per McAdams on conference call, or $7.46 in press release).
        My guess was right – they weren’t hurt by the buybacks. Maybe I shouldn’t have tried to get those extra few pennies. Then again, this is a boring company with a plain-vanilla business plan, holding 88% of their assets in ARMs, and swapping out the fixed rate period of the hybrids. I’ll be amazed (and happy to buy more) if the market slams them tomorrow.
        They are planning to increase leverage in the second half of the year, which is exactly what I would do.

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