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Orchid Island Capital, Inc. (ORC) - Small cap only $385mln . . too much leverage/risk for meThis mortgage finance REIT company would not meet my initial smell test. A 15% yield based on a portfolio of Agency RBMS implies the use of huge amounts of debt ($2.8Bln). The company never experienced a full real estate cycle swing as it is/was started in 2010, so not sure management has the expertise to operate in a down cycle (profile states they use an external management company). (note: We are externally managed and advised by Bimini Advisors, LLC, a wholly-owned subsidiary of Bimini Capital Management,Bimini Capital Management, Inc. is an existing real estate investment trust, or REIT, whose common stock is traded on the OTC Bulletin Board under the symbol “BMNM”.) Our investment strategy focuses on, and our portfolio consists of, two categories of Agency RMBS: (i) traditional pass-through Agency RMBS and (ii) structured Agency RMBS, such as collateralized mortgage obligations, or CMOs, interest only securities, or IOs, inverse interest only securities, or IIOs, and principal only securities, or POs, among other types of structured Agency RMBS. Therefore, not sure if stockholders interests are in line w/ management and/or external management team. Distribution cut 28% from 2015 ($0.18/month) to $0.14/month. Too much debt/leverage exposure for me. Stock -40% from original IPO 2/2013 (according to Yahoo Chart). I just do not like these structured debt products as (1) I do not understand them and (2) they are not that liquid (especially in a fast market) which can result is significant price discovery problems. Remember the movie "The Big Short". Be careful, understand what you own. There seems to be enough liquidity in the daily vol to exit any position but even w/ a small position, I would not feel comfortable holding this. FWIW, there are other REITs that pay monthly that yield 7%-10% w/ much less leverage, that own hard real property assets that may/could grow in value (ie long term capital gains). Good Luck & Good Investing EKS |
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Msg # | Subject | Author | Recs | Date Posted |
7354 | Re: Orchid Island Capital, Inc. (ORC) - Small cap only $385mln . . too much leverage/risk for me | crashcardigan | 1 | 4/29/2017 12:52:25 PM |