Sunday, August 14, 2011

RSY XXXIII: IVR

Sabrient Systems recently upgraded Invesco Mortgage Capital Inc. {IVR is a real estate investment trust (REIT)} to Strong Buy because of its outstanding value profile. IVR should be familiar with RSY portfolio watchers as it was one of the first two positions entered on August 23, 2010. The RSY portfolio had net gains of $1434 (after transaction costs) with nearly a thousand from dividends until it sold out its last lot on June 17, 2011 at the price of $20.96. Friday's price range was $18.28 to $18.90. At that time Sabrient had downgraded IVR to Sell.

IVR has average at best forensic accounting score but has greater potential to outperform the market with lower risks than most stocks at present time according to StockScouter. Insider buying continues to be strong indicator of forward growth. While Earnings Score and Balance Sheet Score is below average, the Sabrient Fundamental Score is 92.7 (out of 100), which measures a company's financial health, including its balance sheet, cash flow, revenue, and earnings quality. With a Sabrient Fundamental Score of 92.7, INVESCO MORTGAGE is substantially higher than the average of its industry group, which carries a Sabrient Fundamental Score of 55.2.

Also of most importance is that Ben Bernanke gave his word that he will continue to shower the banking industry with free money. Not really, but he did promise to keep rates low until at least 2013 as long as the economy continues to show weakness. When evaluating IVR for the portfolio in 2010, it was an issue if interest rates were going to rise, which could hurt highly leveraged firms and industries like REITs. At the time, the Macro View was looking for low interest rates for at least the length RSY was hoping to hold IVR. Now it seems reasonable again that interest rates will remain low for the foreseeable future.

When the buy was recommended last time, RSY suggested buying 400 shares. This time RSY suggests a slightly different approach. First, we want to enter a long position for some exposure on the great upside potential. RSY recommends a buy order of 200 shares of IVR at a limit price of $18.99 (GTC). Second, let us try to capture any future price "dips". RSY recommends a sell of 2 contracts of IVR Jan 21 '12 $17.50 put at a limit price of $1.60 (GTC). Once the long position is taken, looking at writing covered calls is also a possibility. At present time, none look worth the reduced upside potential as most are below even one dividend payout. RSY is expecting the next ex-dividend to be around September 15th.








Bernanke's Zero Interest Rate: What It Means for Your 401K (And What to Do About It) - Seeking Alpha

Increasing Uncertainty Continues to Overshadow Non-Agency Mortgage REITs - Seeking Alpha

Bernanke Buoys mREITs by Removing 'Extended Period' Uncertainty - Seeking Alpha

Agency mREIT Dividends the Obvious Winner After FOMC Interest Rate Announcement - Seeking Alpha


Dividend Yield Should Support Decision to Buy Invesco - Seeking Alpha

Sticking With Proven Agency-mREIT Winners Until Invesco Proves Itself - Seeking Alpha

AGR
Aggressive (30)

INVESCO MORTGAGE CAPITAL INC: STOCK RATING SUMMARY
10
StockScouter


Invesco Mortgage Capital Inc, a mid-cap growth company in the finance sector, is expected to significantly outperform the market over the next six months with less than average risk.

10 is the best possible rating.
IVR : 18.64 +0.32 +1.75% - MSN Money

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