15% Discount To Book Value Is Still Good

One of the mortgage REITs we own still trades around a 15% discount to projected book value. That’s still attractive. Investors in the sector need to have the discipline to stick to an investing strategy. We’ve enjoyed great success using discounts to (current estimated) book value. In this series we’re providing readers with the discounts to trailing book values throughout the sector and a few notes on the current environment. When we provide an index card for an individual mortgage REIT, it includes our most-recent estimate on book values.

PennyMac Mortgage Trust (PMT) dipped a bit since early December, but they also paid out a dividend. The net result is roughly flat. Higher Treasury rates could signal less profitability on mortgage origination, but it's attractive for MSRs (mortgage servicing rights). The net result doesn’t concern me. The discount to Scott’s target price is the largest among the residential mortgage REITs (as of 01/06/2020).

Source: Seeking Alpha

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