ARES - Rithm: Leading MREIT Yielding More Than 11% Remains A Buy
2024-02-12 13:30:00 ET
Summary
- Rithm Capital Corp. investors experienced steep downside volatility last week as the leading mREIT reported its fourth quarter earnings.
- Rithm has ambitions to be a leading alternative asset manager to command a much higher valuation multiple.
- However, Rithm's mREIT-focused business model and performance suggest it remains a long-term pivot. The market will likely remain cautious in the near term.
- I assessed that the market had reflected steep pessimism in RITM, incorporating increased risks emanating from an uncertain 2024.
- With the market still pessimistic about Rithm's transformation, the recent pullback offers RITM another opportunity to buy more shares.
Rithm Capital Corp. ( RITM ) investors experienced relative underperformance to the S&P 500 ( SPX ) ( SPY ) since my previous update in November 2023 . I gleaned a buying opportunity late last year, assessing RITM's relatively attractive valuation and increasingly diversified business model. RITM also experienced increased downside volatility last week as the aspiring alternative asset manager reported its fourth-quarter earnings release . While the company has closed its Sculptor Capital Management acquisition following delays, I assessed the market still values RITM as an mREIT. Given the company's dependence on servicing revenue, net interest income, and net gains on loans, the transition to being valued at a much higher multiple, similar to that of a leading alternative asset manager, remains a distance away....
Rithm: Leading MREIT Yielding More Than 11% Remains A Buy