Invesco Mortgage Capital Inc (IVR), Two Harbors Investment Corp (TWO): Why Insiders Are Bullish on These High-Yielding Stocks?

Higher interest rates

Annaly Capital Management, Inc. (NYSE:NLY) happens to be the largest pure-play mortgage REIT that invests exclusively in long-term fixed-rate residential mortgage-backed securities. The company suffered a lot at the hands of the Fed’s easing as its portfolio was designed for an environment where the interest rate will increase. Now, when the rates have started climbing up, you can expect the company to perform better than its peers. It also reports that its projected net interest income would go up by 17% if the rates go up 50 basis points.

Looking at this, the company’s top executives have started adding to their stake. During the month of May, one director and the CEO added 125,000 shares together at an average price of around $13.60. Remember, these purchases are not part of the executive compensation.

Conclusion

While the markets have started pricing in the Fed’s exit, there are only a few mortgage RIETs that will completely benefit from the exit. These REITs have positioned their portfolios to benefit from a rising-interest-rate environment. This is exactly why their top management teams are also busy increasing their stakes. Therefore, I recommend investors don’t wait until the Fed announces a halt in the easing programs to buy the aforementioned stocks.

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

The article Why Insiders Are Bullish on These High-Yielding Stocks? originally appeared on Fool.com and is written by Adnan Khan.

Adnan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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