On a day that is a sea of green for most stocks and
, some funds are seeing red and it is not just the inverse ETFs
designed to rise when the market falls. Mortgage real estate
investment trust, or mREIT, ETFs are being dragged lower by
American Capital Agency (NASDAQ:
) reported a quarterly loss of $557 million, or $1.57 per share,
Shares of American Capital are tumbling seven percent Friday
on volume that was more than triple the daily average with about
three hours left in the trading day. Not good news for the
yield-hungry investors that have been seduced by the double-digit
yields sported by American Capital and its rivals.
With today's haircut, American Capital has a market
capitalization of about $10.4 billion. That may not sound like
much, but it is enough to make the company, along with rival
Annaly Capital (NYSE:
), the Apple (NASDAQ:
) and Exxon Mobil (NYSE:
) of mREIT ETFs.
Translation: As has been seen with Apple and ETFs, it is fine
to have a
large weight to the stock...as long the stock is
. When the opposite is true, the situation can get ugly.
Such is life for the iShares FTSE NAREIT Mortgage Plus Capped
Index Fund (NYSE:
). This $1.25 billion ETF, a favorite of investors because of its
11.07 percent 30-day SEC yield, is down 2.3 percent today on
REM dominated by Annaly and American Capital. The latter has
adversely affected the former today and that means at least 38.5
percent of REM's weight is not being cooperative. REM has sunk to
a two-week low,
REM has a rival in the form of the almost $130 million Market
Vectors Mortgage REIT Income ETF (NYSE:
). MORT, which turns two in August, is no slouch when it comes to
yield either with a 30-day SEC yield of nearly 10.3 percent.
However, MORT is still down nearly two percent because of its
heavy allocations to Annaly and American Capital. Those two
stocks combine for nearly 30 percent of the ETF's weight.
American Capital gets a weight of 14.2 percent, more than
two-and-a-half times MORT's third-largest holding, Chimera
Bottom line: Like some other ETFs, MORT and REM have excessive
weights to just one or two stocks. And like some of those others
ETFs, MORT and REM have been exposed due to a disappointing
earnings report by one of those companies.
For more on ETFs, click
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