We have been attracted to the mortgage Real Estate Investment Trust Sector due to the ability of the firms to effectively utilize leverage in order to provide investors with high current dividend yields on their investment capital. We are currently invested in CYS Investments (CYS) and we previously held a position in American Capital Agency (AGNC). We previous published a research report evaluating the industry-leading mREIT titan Annaly Capital Management (NLY) as well as the two mREITs that its RIA Subsidiary FIDAC provides sub-advisory services for (Chimera Investment Corporation (CIM) and CreXus Investment Corporation (CXS)). We concluded that Annaly deserves its reputation as the bellwether of the industry. We were also introduced to CreXus, which specialized in commercial real estate mortgages.

We previously discussed how Chimera Investment Corporation is typically one of the highest-yielding mREITs due to its focus on non-agency subprime paper. Unfortunately this paper is so toxic that the company is either unable or unwilling to file time financial statements. We find its worth repeating that Chimera is as ugly and repulsive as its namesake creature from Greek mythology. We wonder when the stink from Chimera’s underperformance will serve as a negative for Annaly, even though both companies are separate corporate entities with separate ownership distributions. In short, we think Annaly should just put Chimera on an ice floe and set it adrift.

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