Angel Oak Mortgage REIT Inc. (AOMR)

Our PAST TOP PICK with AOMR has triggered its stop at $9.  To remain disciplined, we recommending covering the position at this time.  When combined with our previous guidance, this will result in a net investment loss of 10%.  

We reiterate this first mortgage company as a TOP PICK. Interest revenues grew 30% over the year.  The company was able to offer 5 securitized offerings over the year - bettering their goal of one per quarter.  It trades at 8x earnings, at book value and supports a ROE of 11%.  We recommend trailing up the stop (from $8) to $9, looking to achieve $12 — upside potential of 20%.  Yield 7.6%

AOMR invests in first lien mortgages not qualified for conventional financing within the US.  It provides a tax effective distribution combed with a return of capital.  As such its  robust dividend has a high payout ratio.  We like that cash reserves are holding steady as the company aggressively retires debt.  It trades at 8x earnings, under book value and supports a ROE of 29%.  We recommend setting a stop-loss at $8.00, looking to achieve $12.50 -- upside potential of 21%.  Yield 12.5%