Chimera Investment Corporation (CIM) Filing Should Spook Even the Pluckiest Investor

Page 1 of 2

For those steadfast Chimera Investment Corporation (NYSE:CIM) investors who were always certain that the wayward mortgage REIT would come through with its long past-due passel of financial disclosures, Friday was a banner day. Or rather, evening — since Chimera waited until after closing time to file its 10-K from 2011 with the Securities and Exchange Commission.

That in itself seems a little fishy, doesn’t it? Was Chimera Investment Corporation (NYSE:CIM) hoping no one would notice the filing? Surely, management can’t be that daffy, since no one with even a fleeting interest in the sector could have missed all the hullaballoo over these overdue filings. Even the NYSE was ready to give this outfit the boot, though it did allow them more filing extensions than I would have expected.

Chimera Investment Corporation (NYSE:CIM)Now that some information is finally available, I took a gander at Chimera’s 2011 10-K, and it’s a hoot. Truly, I have to agree with fellow Fool John Maxfield, who has expressed doubts regarding this trust’s reliability and trustworthiness.

Risk factors ad infinitum
Every company lists risk factors on these 10-K forms, and while often they are somewhat predictable, they can also be quite telling. Because of their nature, mREITs may have more to say about risk than other types of companies. Chimera has a good 35 pages dedicated to risk factors, which seems like a lot; Annaly Capital Management, Inc. (NYSE:NLY) , the established mREIT whose subsidiary FIDAC manages Chimera Investment Corporation (NYSE:CIM), has 27 pages. By contrast, American Capital Agency Corp. (NASDAQ:AGNC) , has about 19.

Most interesting are the risks related to management. As Mr. Maxfield has pointed out before, the Annaly-Chimera relationship is an especially intimate one: The CEO of Chimera is the son of one of Annaly’s directors, and A. Alexandra Denahan is Chimera’s CFO — as well as Annaly CEO Wellington Denahan-Norris’ sister. To be fair, close relationships like this may not be unusual in this industry. After all, American Capital Agency and its hybrid cousin, American Capital Mortgage Investment Crp (NASDAQ:MTGE) share a common CIO in Gary Kain — though both those companies seems to be well-run, in contrast to Chimera.

The risks laid out in the 10-K in regards to its management setup are myriad, and it is interesting to note the management fees paid. For 2011, Chimera paid fees of $52 million, in 2010, it paid nearly $41 million, and for 2009, the management fee was close to $26 million — and that’s not even counting all the expenses they were reimbursed. Fees were halved as of November 2012, something agreed to this very month. A little late, it seems: A share performance graph shows the mREIT consistently underperforming both the BBG REIT Index and the S&P 500 since 2008.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!