too often, traders will move their capital into a sector that’s hot,
watch the stock they select lose value; other times we see perfectly
companies losing share value because their peers or sector are falling
Bear of the Day, PennyMac
Mortgage (PMT - Snapshot Report)
(Zacks Rank #5) might have a little bit of both going
Mortgage Investment Trust is a real estate investment trust. The
operates as a specialty finance company that will invest primarily in
residential mortgage loans and mortgage-related assets. A
substantial portion of the mortgages they acquire
may be distressed and acquired at discounts to their unpaid principal
10%+ dividend makes them very attractive and since the housing market
they should be a raging buy, right?
the housing sector has been booming, the one-two punch from PMT is the
that PennyMac buys distressed debt from FDIC liquidations of failed
Treasury Legacy Loans Program auctions, and direct acquisitions from
and insurance companies and foreign banks.
less and less banks and loans are stressed or defaulting in this
economy, then theoretically they have fewer loans to buy and profit
a rising interest rate environment is not favorable for a company like
PennyMac. Even though the Fed is a ways off
from actually tightening, even a change in monthly bond purchases could
send mortgage rates higher (they are up over a 1% in the last 70 days
and stifle growth in housing.
Even though shares of PMT have dropped almost 25% from a high of over
February, to their current value of just under $22.00, there might
high risks here.
and their attorneys are investigating CEO Stanford L. Kurland on claims
self-dealing after certain statements that were made in an IPO
in February of this year when PennyMac Financial Services filed a
Statement to be spun off by PMT.
look at the Zacks Price & Consensus chart shows a sharp,
in FY2013 and 2014 earnings estimates. This drop is commiserate with
in share price and while the forward P/E of 7 and dividend yield of
seem very attractive, there could be some more pain before this
for the current quarter and Q3 have come down dramatically as well and
negative for all periods.
this company has been beaten down a little too much here, but I would
see what the earnings report shows on August 1st before jumping
in. There are way too many moving parts
to this story and the fact that analysts have gotten this aggressive
to believe there is really fire behind all the smoke.
you want to buy a mortgage related stock with a little less volatility
check out JP
Morgan-Chase (JPM - Analyst Report)
(Zacks Rank #2) or America’s largest mortgage servicer,
Wells Fargo WFC (Zacks
A Levy is one of the most highly sought after traders in the world and
member of three major stock exchanges. That is why you will frequently
appear on Fox Business, CNBC and Bloomberg providing his timely
other investors. He has written and published two tomes, “Your
Options Handbook” and “The
Bloomberg Visual Guide to Options”. You can
discover more of his
insights and recommendations through his two portfolio recommendation
Trader- Learn to
buy stocks likely to have robust earnings BEFORE they report.
Zacks TAZR Trader
– Technical Analysis +
Zacks Rank. Best of both worlds approach to find timely trades.
Jared A Levy on twitter at @jaredalevy
Jared A Levy on Facebook