Friedman Billings Ramsey cuts expectations for three real estate investment trusts that deal in mortgages, but said the Fed action could help the sector.
March 11, 2008: 10:32 AM EDT
NEW YORK (AP) -- A Friedman Billings Ramsey analyst on Tuesday pared her price targets on three real estate investment trusts that deal in mortgages, but said the sector could recover if the Fed keeps adding cash to the banking system.
The Fed moved Tuesday, in conjunction with central banks around the world, to make more liquidity available to more market players.
Merrill Ross of Friedman Billings Ramsey (FBR) said shares of Annaly Capital Management Inc (NLY)., Anworth Mortgage Asset Corp (ANH). and MFA Mortgage Investments Inc (MFA). are inexpensive. But she cut her price targets, saying investors are taking cash out of the troubled market. Fears about companies' abilities to meet margin calls -- or pay back investors when they demand their money -- have hurt stocks in the sector.
She maintained "Outperform" ratings on all three stocks, and said if the Federal Open Market Committee keeps injecting cash into the banking system, and the three companies can continue to make margin calls, these REITs will do better than the sector as a whole over the next year.
Ross lowered her price target on Annaly shares to $21 from $25. The stock closed Monday at $14.58.
Her target on Anworth stock went to $9 per share from $11. The shares finished at $5.55 Monday.
Ross lowered her target on MFA shares to $9 per share from $14. The stock closed at $7.26 Monday. Late last night, MFA Mortgage Investments Inc. said it will sell assets to reduce its debt-to-equity levels, or leverage, amid continued stress in the financial industry.
The company also forecast first-quarter earnings of 18 cents per share, up from 16 cents in the 2007 fourth quarter, but below analysts' consensus estimate of 24 cents per share, according to a Thomson Financial poll.
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