Bank of America:
“Following third-quarter earnings, we upgraded Bank of America to outperform to reflect our belief that our FY15E TBV estimate of $15.52 should provide good downside support to the share price,” the report said.
“Further, we believed that a drastically reduced level of litigation expenses going forward would lead to book value growth at an institution that has struggled to benefit from core earnings power since the crisis,” it added.
In August, BofA agreed to a $16.65 billion settlement over toxic mortgages, collateralized debt obligations and an origination release on residential mortgage loans sold to Fannie Mae and Freddie Mac in the run-up to the financial crisis.
The bank finished the day down 2.99%, but is up 5.77% over the past six months and 1.20% over the past year.
Two Harbors Investment:
“Given our expectation of a continued "lower for longer" rate environment in 2015, the demand for yield should be a top priority, making TWO’s 10.3% dividend yield compelling,” the report said.
Then combine this with valuation at 90% of book value on top of the stock trading in line with other hybrid mREIT peers despite an historical 5%–10% premium to the group, TWO screens as an attractively valued stock heading into 2015.
“From the fundamental side, a continued low rate environment, combined with FBR’s belief that residential mortgage banking volumes will improve in 2015, sets up TWO for a standout year in its new, but growing, conduit lending securitization business—completing two securitizations in 2014 for $642 million,” it continued.
Two Harbors closed the day up 0.79%, and it up 6.48% over the last year. However, it is down 0.88% over the past six months.
The HW 30, HousingWire’s exclusive list of mortgage-related stocks, completed the day down 1.88%.