SAB Capital’s Stake in American Capital Mortgage Now Above 10%

Today, SAB Capital Management, managed by Brian Jackelow, announced in a Form 3 filing with the SEC that it had increased its stake of American Capital Mortgage Investment Corp (NASDAQ:MTGE) above 10%. This transaction increases SAB Capital’s holdings of American Capital Mortgage from 3.3 million shares to a little over 4.7 million shares.

American Capital Mortgage Investment Crp (NASDAQ:MTGE)

In early June of this year, the hedge fund reported that it had taken a 7.4% passive stake in the mortgage REIT, before reporting that it held $79.3 million worth of its stock in its most recent 13F filings. With its most recent purchase, SAB Capital now owns more than $122 million worth of American Capital Mortgage, which would make it the fund’s second largest holding.

Jackelow’s fund has a bit of a history with American Capital Mortgage, as it first reported a $2.8 million position in the mREIT in third quarter of 2011. Considering the fact that SAB Capital has increased its holdings of the stock by nearly thirtyfold in a little under a year’s time, it’s definitely worth taking a closer look.

Since SAB reported its initial position in American Capital Mortgage, its shares have returned 53.8%, outpacing the diversified REIT industry’s average (14.8%), and the real estate sector (18.9%) as a whole. Moreover, the mREIT has also generated a more impressive return than peers like Annaly Capital Management, Inc. (NYSE:NLY) at 6.1%, Two Harbors Investment Corp. (NYSE:TWO) at 35.1%, Hatteras Financial Corp. (NYSE:HTS) at 15.6%, Invesco Mortgage Capital Inc. (NYSE:IVR) at 43.3%, and CYS Investments Inc. (NYSE:CYS) at 20.0%.

Despite these gains, American Capital Mortgage still trades at a modest Forward Price-to-Earnings ratio of 6.2X, below Annaly Capital (10.8X), Two Harbors (9.9X), Hatteras Financial (7.5X), and Invesco Mortgage Capital (6.9X).

As is with the case of most mREITs though, it’s more useful to look at Funds from Operations (FFO), which is a measure of net income excluding property value fluctuations and depreciation. Essentially, FFOs indicate how easily an mREIT can maintain its dividend payments into the future.

American Capital Mortgage has grown its FFO by 301.2% per quarter over the past 12 months, easily outperforming the likes of Annaly Capital (-8.7%), Two Harbors (20.4%), Hatteras Financial (2.9%), Invesco Mortgage Capital (-6.9%), and CYS Investments (0.5%).

From a dividend standpoint, the mREIT looks even more attractive, as it offers a yield of 11.0%, with a projected yield of 14.1%. This forward-looking estimate is above many of American Capital Mortgage’s competitors, including Annaly Capital (12.5%), Two Harbors (13.5%), Hatteras Financial (12.3%), Invesco Mortgage Capital (12.4%), and CYS Investments (13.7%).

Consequently, it appears that SAB Capital is bullish on American Capital Mortgage because of the mREIT’s attractive valuation at current price levels, its superb FFO growth over the past four quarters, and its advantageous dividend yield. In fact, it can be deduced that American Capital Mortagage’s yield forecast is exceptionally upbeat, as strong FFO growth can drive more dividends into investors’ pockets going forward.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
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

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!