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Re: Compass Point Initiates NRZ at BUY EOM $19 target. Here's a brief clip from the 18-page PDF.... "We are initiating coverage of New Residential Investment with a Buy rating on our view that the shares have been overly depressed due to overblown concerns on its MSRs exposure to rates while the portfolio has been substantially hedged, as well as the underappreciated potential of the long securities/call rights portfolio's positive optionality-linked gains and origination platform. NRZ has a well diversified portfolio, hedging long-duration exposure assets (resi securities, mortgage loans) against negative-duration MSRs and servicer advance investments - which in combination should continue to generate substantial ROEs in any foreseeable interest rate environment. The shares are trading well below its historical range on price/book, as well as in context with peers. We note the substantial lower risk and non-replicable nature of its portfolio. We are assigning a price target of $19.00 per share based upon a comparable matrix price of 103% BV/10% yield and would expect valuation metrics to expand given ongoing traction in call-rights related gains as well as the increasing contribution from the origination and servicing businesses." |
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