Two Harbors Investment Corp. (TWO - Free Report) recently commenced an underwritten public offering of 18 million shares, in a bid to raise fresh capital. Further, as part of the offering, the company anticipates to give underwriters a 30-day option to purchase up to an additional 2.7 million shares.
Two Harborsplans spend the proceeds for targeted asset acquisitions and general corporate purposes. In fact, it will allocate a chunk of stockholders’ equity in a variety of assets, including residential mortgage-backed securities (RMBS), mortgage servicing rights (MSRs) and other financial assets.
Notably, the company is primarily focused on investments in agency residential mortgage-backed securities (RMBS) and MSRs. This strategy of pairing the two instruments offers it a competitive edge. Hence, efforts to increase investments in these assets is a strategic fit.
The latest public offering will help diversify the company’s investment options and expand its portfolio. Further, it will likely drive external growth on the back of accretive acquisition opportunities.
The common stock offering also boosts the company's financial flexibility. Moreover, it provides ample scope for deploying capital for long-term growth opportunities and rewarding higher returns to stockholders, at the same time.
In fact, the company has been making efforts to increase its market capitalization and strengthen the equity base. In 2018, it acquired CYS Investments that helped improve its stock liquidity. Management expects the integration of both companies will lower expense ratio and enhance its portfolio of target assets, which includes non-agency investments, as well compared to an agency-only strategy. This will likely benefit the company in the upcoming quarters.
Shares of Two Harbors have outperformed its industry over the past three months, gaining 7.6% compared to the industry’s rise of 6.3%.
It carries a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Key Picks
Other top-ranked stocks in the same space include Annaly Capital Management Inc (NLY - Free Report) , Chimera Investment Corporation (CIM - Free Report) and MFA Financial, Inc. (MFA - Free Report) . All three stocks carry a Zacks Rank of 2, at present.
Annaly’s earnings per share estimates for the current year have been revised marginally upward to $1.18 in the last month. The stock has inched up 0.5% over the past six months.
MFA Financial’s Zacks Consensus Estimate for 2019 earnings per share has been revised marginally upward to 75 cents, over the last 30 days. Its shares have gained 10% in three months’ time.
Chimera Investment’s earnings per share estimates for the ongoing year remained unchanged at $2.17 over the past month. Its shares have appreciated 9.6% in the past three months.
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