Investing

Russell 2000 Index Changes Positive for Multiple Mortgage Finance Players

Jon C. Ogg

Published: June 13, 2019 9:55 am

Last Updated: January 30, 2020 7:42 pm

The Russell indexes are rebalanced each year, and the latest preliminary rebalance announced recently. The final list is expected on June 14, and the formal rebalance will occur on June 28. These changes create many inflows of funds, with so many funds tracking the Russell 2000. Oddly enough, some shifts up may cause net outflows due to less money from funds following one Russell index versus another.

Credit Suisse has noted that two of its mortgage finance names should see big inflows and outflows in shares as a result. Several other companies with inflows of 1.5 days or more of average trading volume also have been included here, as has trading data and the consensus analyst target prices from Refinitiv.

Ellington Financial Inc. (NYSE: EFC) has elected to take real estate investment trust (REIT) status and it will join the Russell 2000 as expected. Credit Suisse noted that it will have the biggest change in its coverage group, and it expects that about 3.3 million shares will have to be purchased by mutual funds and exchange-traded funds (ETFs) tracking the Russell 2000 Index. For some context, note that this represents about 11% of the total number of shares that are outstanding and is roughly 22 days worth of trading volume.

Trading at $17.87, Ellington Financial has a 52-week range of $14.69 to $18.46. Its consensus target price is $19.14.

MGIC Investment Corp. (NYSE: MTG) is the one company that might face an outflow of funds rather than inflows. MGIC is set to join the Russell 1000 from the Russell 2000, and Credit Suisse now expects outflows of approximately 26.3 million shares. This is roughly 9.6 days of trading volume, and Credit Suisse’s call is based on less passive money following the Russell 1000.

MGIC Investment recently traded at $13.84, and it has a 52-week range of $9.41 to $14.97. Its consensus target price is $16.68.

Other expected changes and expected inflows from Credit Suisse are below:

Cushman & Wakefield PLC (NYSE: CWK) is expected to have 3.9 days worth of trading volume, as inflows will be needed. Shares recently traded at $17.80, in a 52-week range of $13.25 to $19.79 and with a consensus target price of $21.86.

Essential Properties Realty Trust Inc. (NYSE: EPRT) is expected to have 3.6 days worth of trading volume, as inflows will be needed. Shares traded at $21.31, in a 52-week range of $13.05 to $21.68 and with a consensus target price of $21.43.

PennyMac Financial Services Inc. (NYSE: PFSI) is expected to have 30.0 days worth of trading volume, as inflows will be needed. Shares traded at $20.57, in a 52-week range of $18.77 to $24.50 and with a consensus analyst target of $26.17.

AG Mortgage Investment Trust Inc. (NYSE: MITT) is expected to have 2.7 days worth of trading volume, as inflows will be needed. Shares traded at $15.78, in a 52-week range of $15.25 to $19.69 and with a consensus target price of $17.00.

PennyMac Mortgage Investment Trust (NYSE: PMT) is expected to have 2.5 days worth of trading volume, as inflows will be needed. Shares traded at $21.60. The 52-week range is $17.88 to $21.91, and the consensus target price is $22.19.

Arlington Asset Investment Corp. (NYSE: AI) is expected to have 2.5 days worth of trading volume, as inflows will be needed. Shares traded at $6.87, in a 52-week range of $6.65 to $11.45 and with a consensus analyst target of $8.08.

ARMOUR Residential REIT Inc. (NYSE: ARR) is expected to have 1.5 days worth of trading volume, as inflows will be needed. Shares traded at $18.38, in a 52-week range of $17.03 to $24.07 and with a consensus target price of $19.00.

24/7 Wall St.
SunTrust Has Contrarian Energy Calls for a Nervous and Expensive Market