NYMT - Huge Disparity In These 2 REITs
2024-04-12 06:39:13 ET
Summary
- We're looking at two REITs with similar portfolios and a 20% difference in valuation.
- For these REITs, we believe changes in book value were pretty small during Q1 2024.
- Core EPS is important for market perception but some investors focus far too much on it.
The market has been paying a significant premium for shares of AGNC ( AGNC ). It's remarkable to see such a large spread between AGNC and other mortgage REITs. For instance, Annaly Capital Management ( NLY ) and Dynex Capital ( DX ) have much lower price-to-book ratios. This is particularly relevant because book value (current book value, not trailing) is the most important input for valuing most mortgage REITs. No, it is not the dividend yield. No, it is not GAAP earnings. That one is just dumb. GAAP EPS is horribly flawed for most mortgage REITs.
Current Vs. Trailing
We like to use updated estimates for book value per share for several REITs. However, we think the book value per share on 12/31/2023 and 3/31/2024 for these 3 REITs will be very similar. That doesn't mean there were no changes during the quarter, but the values from the start and end of the quarter should be pretty similar....
Huge Disparity In These 2 REITs