The Motley Fool Discussion Boards

Previous Page

Investment Analysis Clubs / $$$MR. MARKET$$$ Momentum Stocks


Subject:  My XMAS pick ==> MFA Date:  12/22/2001  10:01 AM
Author:  MRMARKET Number:  251 of 344

I bought MFA yesterday at 9. I will sell it in 4 to 6 weeks at 10.70. Here's why I like MFA:

*America First Mortgage Investments, Inc., a REIT, is engaged in the business of investing in mortgage-backed securities and mortgages. For the nine months ended 9/30/01, revenues rose 28% to $34.5 million.

*MFA stock price is up 90% this year

*MFA pays a 12% dividend. Stewart Zimmerman President and Chief Executive Officer said, ``We are proud of our progress in 2001. MFA's strong financial performance has allowed us to significantly raise our dividend to shareholders. ...Based on the expected yield from our existing high quality portfolio and a reduced cost structure due to becoming a self-advised REIT, we believe MFA will be able to maintain the dividend at this level for the foreseeable future.'

* P/E is only 8.

* Profit margin is 30%. ROE is 13%.

The fundamentals for continued high performance are good due to the steepness of the yield curve caused by very low short term interest rates. In essence, MFA is a money machine now.

Stewart Zimmerman, President and Chief Executive Officer commented on the third quarter 2001 results, ``We remain pleased with MFA's strong financial results in the third quarter which has allowed us to significantly raise our dividend. We continue to benefit from lower financing costs, as indicated by the decrease in our average cost of borrowed funds to approximately 3.87% from 4.66% for the second quarter of 2001.'

During the third quarter of 2001, the average securities portfolio yield decreased to 5.87% from 6.39% for the second quarter of 2001. Reduced funding costs more than offset the decline in the portfolio yield, resulting in a wider portfolio spread (difference between our average security portfolio yield and our average cost of funds) of 2.00% compared to 1.73% in the previous quarter.

The prepayment rate on our mortgage backed securities portfolio averaged 21% Constant Prepayment Rate (``CPR') in the quarter. Zimmerman explained that, ``With recent declines in interest rates we had been expecting a rise in our CPR due to mortgage refinancing. However, given the positive slope of the yield curve, we expect adjustable-rate mortgage rates to remain well below fixed mortgage rates. With homeowners lacking the economic incentive to refinance out of ARMs and into fixed rate securities we expect our portfolio CPR to remain near this level for the remainder of 2001.'

Sound good to me. Merry Christmas!

I am HUGE!!!

$$$MR. MARKET$$$

Copyright 1996-2022 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us