Analyst Daniel Altscher of FBR Capital Markets says CYS Investments Inc (CYS) is one of his “outperform”-rated stocks, as the company is trading at about 90% book value, offers a 14%-plus dividend yield and is in line with his thesis on rates.
“The stock and book value has been a little more beta to rates, and you can see it in the stock movement, you can see it in the book value movement,” Altscher said. “But my overall call on rates is that we are not going to see a substantial move up in rates over the next several months or so, even with the risk of taper ending. So from that perspective, I’m fine owning a little more beta on rates and owning a little bit more beta on book value, because I feel I’m getting paid a substantial risk-adjusted return to take on that risk.”
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Altscher says that for someone who agrees with his thesis or is looking for a bear market hedge, CYS can be a very interesting investment.
“We’ve obviously had some issues in Ukraine, we’ve had talks about further QE from the ECB; there is reason to think that the world is not a jolly, improving place in some respects. And so in that case having a bear market hedge, if you will, in a portfolio that provides you income and you basically get paid to be short the market in some respects, I think that’s a good name to own,” Altscher said.
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