New Residential Investment Corp. (NYSE:NRZ), FREDDIE MAC (OTC:FMCC) – If you had invested $1,000 in new home investment stocks a year ago, here’s how much you would have now


Investors who have held stocks over the past year have generally seen strong gains. In fact, the SPDR S&P 500 ETF Trust (NYSE: SPY) total return over the past 12 months is 28.8%. But there’s no doubt that some big-name stocks have performed better than others along the way.

The bumpy course of the new residential: One company that has been a disappointing investment over the past year has been Mortgage REIT New Residential Investment Company (NYSE:NRZ).

Related Link: If You Invested $1,000 In New Home Mortgage Capital A Year Ago, Here’s How Much You Would Have Now

Shares of new residential REITs and other mortgage REITs were crushed in March 2020 as the pandemic created incredibly difficult financial conditions for businesses.

Recession fears sent the value of New Residential’s mortgage-backed securities (MBS) plummeting. The company was eventually forced to sell assets in unfavorable market conditions to shore up its balance sheet. It was also forced into a dividend cut.

Before the crisis, New Residential focused on creating mortgages that could not be purchased by National Federal Mortgage Association (OTC: FNMA) or Federal Mortgage Corporation on Home Loans (OTC: FMCC). The lack of liquidity in the mortgage market during the COVID-19 crisis prompted New Residential to completely change its business model to focus on mortgages that met Fannie Mae and Freddie Mac’s purchase criteria.

At the start of 2020, New Residential shares were trading at $16.16. By early March, the stock had fallen to $15.68 as news of the spread of the coronavirus in China sparked concerns of a US pandemic.

When the market crashed during the COVID-19 outbreak in the United States in March, shares of New Residential fell as low as $2.91 at the height of pandemic fears.

As the market rebounded from pandemic lows, new residential also began to rebound. The stock hit $9.42 per share in June before the recovery rally died down.

New residential mortgages regained broader market momentum in the second half of 2020. The stock was back above $10 by the end of the year.

New residential in 2021, beyond: As mortgage market conditions improved in 2021, New Residential began acquiring smaller lenders and growing market share. Its recent takeover of Genesis Capital, which specializes in lending to professional property developers, is also helping to reduce New Residential’s exposure to potential Federal Reserve interest rate hikes in 2023.

New residential stock hit 2021 highs at $11.81 in November before retreating from highs to end the year. Today the shares are hovering around $10.80.

New residential investors who bought the REIT a year ago and continued to hope for a recovery in 2021 have generated a lackluster return on investment at this point. In fact, $1,000 of new residential stock purchased on December 22, 2020 would be worth about $1,167 today, assuming reinvested dividends.

Look forward: Analysts expect bullish price action from New Residential over the next 12 months. The average price target among the 11 analysts covering the stock is $13, suggesting a 19.7% upside from current levels.

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