Gator Capital Management recently released its Q4 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 29.18% for the fourth quarter, outperforming its benchmark, the S&P 500 Index which returned 12.15% in the same quarter. You should check out Gator Capital Management’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.
In the Q4 2020 Investor Letter, Gator Capital Management highlighted a few stocks and Arlington Asset Investment Corp. (NYSE:AAIC) is one of them. Arlington Asset Investment Corp. (NYSE:AAIC) is a mortgage real estate investment trust. In the last three months, Arlington Asset Investment Corp. (NYSE:AAIC) stock gained 23% and on February 24th it had a closing price of $4.11. Here is what Gator Capital Management said:
“Arlington Investment (“AAIC”) is a mortgage real estate investment trust. AAIC’s liquidation value (or book value) is $5.90, and the stock is trading for $3.66. We don’t think it will return to $5.90 in the near term, but we believe the stock can get to $5.60 (or 90% of the estimated Q4 book value) in 6 to 12 months, which is +53% higher than the current price.
The management at AAIC has made strategic changes to increase their liquidation value. During the third quarter, they bought back stock at a discount to increase the liquidation value from $5.63 to $5.92. When they report the 4th quarter, we expect they will announce they continued to repurchase stock. We estimate the liquidation value will rise to $6.10-$6.20. The company is involved in the mortgage market, so it is not a franchise company like Disney or Microsoft that you can own forever. This is just a trade from $3.66 to $5.60. We think the downside is minimal because management reduced risk earlier in the year. The company does not have much leverage. On recent conference calls, management has expressed a conservative stance about investing the company’s capital.
Insiders at AAIC purchased shares on the open market at the end of September and again in early January. We believe AAIC has attractive potential return without much downside.”
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Disclosure: None. This article is originally published at Insider Monkey.