Dallas, Texas 08/25/2014 (FINANCIALSTRENDS) – ARMOUR Residential REIT, Inc.(NYSE:ARR) suddenly finds itself at the end of a revised coverage curve. Where once analysts have been crying hoarse and been bullish about their coverage, a sudden second quarter, restrictive performance has cost this real-estate investment fund short, leading to a Neutral-capping.
Why and where did ARR go wrong?
ARMOUR Residential REIT, Inc.(NYSE:ARR) analysts point out that a defensive, which could otherwise be termed a conservative approach has done-in the company.
In an environment where the interest rates are low, the approach of the company by remaining defensive has definitely hit a raw note with industry watchers and investors alike.
They argue that the nature of its investments in fixed rates and adjustable rate residential MBS are at the core of the wrong-doings, in their opinion. In an environment where their principal and interest payments are government-backed or are supported by sponsors, the continued side-line approach does leave the investor wanting.
Analysts predict that the bullish sentiment this far, was that given the favourable factors and the financial leverage that it already possess, it could have tracked a different growth plan instead of remaining conservative with the instruments it invested in.
The portfolio it continues to remain interested in is a low yield spectrum with the 15-year and 20-year MBS which talks of over-hedging is definitely counter-operative.
ARMOUR Residential REIT, Inc.(NYSE:ARR) should see a return to bullish ratings, if it were to build a more aggressive investment appetite outside of its current portfolio. It’s current structure has only mitigated its EPS and continues to place it under pressure, given the high costs of hedging combined with the spectrum of low asset yield.