2013 was an incredibly tough year for the mortgage real estate investment trusts (mREITS). Most were down 20%-40%. Some were fortunate and only lost a few percentage points, while others have been cut in half. There's a few reasons why this happened. One was fear. Fear of the Fed. Fear of tapering. Fear of the companies being unable to keep the lights on. Part of it was of a technical basis, where the negative momentum got started and like lemmings many investors followed suit by pushing that sell button. A lot of this had to do with the sharp rise in interest rates during the summer. Since then, earnings have suffered, the portfolios have been pressured, the interest rate spreads narrowed and book values have fallen because of interest rate volatility. The rapid ups and downs of rates in 2013 have impacted mREITs portfolios. This is really what just crushed the company's portfolios. The truth is that mREITs cannot handle rapid rises in rates. That said, if long-term rates increase gradually while short-term rates stay stagnant, this can widen the interest rate spreads. The companies can also handle slowly rising rates in time through their leverage strategies and hedging plans. All of this needs a strong management. Annaly Capital (NYSE:NLY) has one of the most seasoned management teams in the business. On top of that, I believe the stock is bottoming, and the fundamentals are too strong to ignore.
Is The Stock Bottoming?
Anything can.............................READ MORE
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