Annaly Capital Management, Inc. (NLY), Two Harbors Investment Corp (TWO): Buy These mREITs Around QE Unwinding

Within the non-Agency space, Javelin Mortgage Investment Corp (NYSE:JMI) is an mREIT you should stay away from. Although hybrid mREITs are preferred, Javelin Mortgage only has 11% non-Agency paper in its entire asset portfolio, which means its portfolio is tilted towards the Agency space. This, combined with an extended duration of its securities, exposes the company’s book value to changes in interest rates. Its duration increased from -0.15 years to 1.71 years at the beginning of the June. Javelin is the sister company of ARMOUR Residential REIT, Inc. (NYSE:ARR), the pure-play mREIT that has suffered the most since rates started climbing.

Conclusion

The Agency mREITs space has been hit hard by the prevailing confusion about the Fed’s exit from the Agency MBS markets. As a result, the hybrids are preferred over them. Within the hybrid mREIT sector, Two Harbors Investment Corp (NYSE:TWO) remains the top pick with plenty of positive stock price drivers and positive earnings potential. Western Asset Mortgage is another option. However, Javelin Mortgage is one hybrid mREIT that will not benefit from the current scenario.

Adnan Khan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Buy These mREITs Around QE Unwinding originally appeared on Fool.com.

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