Billionaire Leon Cooperman Finds Yield in Chimera

Billionaire David Tepper’s Appaloosa Management had been buying shares of Chimera Investment Corporation during the third quarter of 2012, and owned over 10 million shares according to its 13F filing (find Tepper’s favorite stocks). D.E. Shaw, a large hedge fund managed by billionaire David Shaw, reported a position of a little under 16 million shares at the time (check out more stocks D.E. Shaw owned).

Other real estate investment trusts with high yields include Annaly Capital Management, Inc. (NYSE:NLY), American Capital Agency Corp. (NASDAQ:AGNC), Capstead Mortgage Corporation (NYSE:CMO), and MFA Financial, Inc. (NYSE:MFA). All four of these companies invest a significant share of their capital in mortgage backed and other real estate related securities. They are also up to date as far as their financial disclosures, and in fact their P/B multiples are much in line with Chimera’s generally in the 0.9 to 1.0 range. Annaly and American Capital Agency also offer dividend yields of more than 10% going by recent dividend payments and the current stock price. The other two peers offer high dividend yields as well: Capstead’s is just shy of 10% while MFA’s yield is about 9%. Of course, as investors in subprime mortgages they are likely exposed to the same macro factors as Chimera.

We’re not sure that Chimera is a particularly good opportunity compared to its peers. It’s hard to see its filing problems as anything other than a signal of poor management and governance, and the stock doesn’t seem cheap compared to similar companies on a book basis. While the dividend yield is high, so is that of other companies such as Annaly and American Capital Agency. While Cooperman’s interest is notable we would recommend that investors research at least those other two companies before making a buy decision.

Disclosure: I own no shares of any stocks mentioned in this article.