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New Residential: A Mortgage REIT

03/16/2017 2:50 am EST

Focus: REITS

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Based in New York City, New Residential Investment Corp. (NRZ) is a real estate investment trust (REIT) that invests primarily in mortgage-related securities and services, notes Mark Skousen, growth and dividend expert and editor High-Income Alert.

Over the last several decades, the U.S. mortgage market has reached $21 trillion. It also has grown increasingly complex. Long gone are the days when virtually every home buyer took out a 30-year, fixed-rate loan.

Mortgages now vary greatly in duration, liquidity, credit quality, yields and terms. This complexity has created a huge opportunity for those select analysts who truly understand this market.

This is especially true in the aftermath of the Great Recession. There have been enormous structural changes in the way mortgages are originated, owned and serviced.

New Residential is one of the elite few with the capital, industry experience and key business relationships to take advantage of these opportunities.

Just take a look at the numbers. New Residential recently smashed estimates when it reported that quarterly net income soared 119% on a 202% increase in revenue. Management is earning a healthy 18% return on equity. And the trust enjoys a whopping 63% profit margin.

In a conference call after the report, CEO Michael Nierenberg said, “2017, looking forward, quite frankly, is going to be more of the same... and, hopefully, pay off quite well for shareholders.”

He wasn’t just talking. Nierenberg bought 18,600 shares last month, an investment of $279,000. He now owns a total of 935,352 shares, a strong vote of confidence.

Clearly, Nierenberg believes the shares are undervalued at just eight times earnings. And no doubt he is also excited about the prospect of collecting the current 11.3% yield. So let’s follow his lead.

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