Taking a Deeper Look at the Opportunity in Javelin Mortgage

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While the broader markets are struggling in 2014, mortgage real estate investment trusts, or mREITS, are up 5-10 percent on average. One of my favorites over the past month is Javelin Mortgage (NYSE:JMI). The stock ended 2013 approaching $14. Now it is at $14.50. That said, I think the next stop is $15 per share in first-quarter 2014.

Just what is Javelin Mortgage?

First, I will be honest and straightforward. Javelin Mortgage is a very young company that went public just more than a year ago, on October 3, 2012. The team that runs Javelin Mortgage is Armour Residential Management LLC, pursuant to a management agreement, the same name behind the popular Armour Residential REIT (NYSE:ARR).When shares began trading, about 6.5 million shares exchanged hands on day one, and the stock closed trading at $19.60 per share. It should be noted that another offering to raise cash was conducted in second-quarter 2013 — an offering of 6 million shares, bringing the total float to 13.5 million shares outstanding.

Javelin mortgageā€™s portfolio

Javelin Mortgage is a bit riskier but also more diversified than other companies in the mREIT space, given its hybrid nature and the fact that it doesn’t just invest in the safer agency-backed securities. Instead, Javelin Mortgage is engaged in investing primarily in hybrid adjustable-rate and fixed-rate mortgage-backed securities and mortgage loans.