With Greece having one sandal out the door of the Eurozone and the Chinese stock market in such a free fall it prompted government intervention, pretty much everyone agrees the Federal Reserve is probably not going to raise interest rates at the next opportunity. And investors in Santa Monica real estate investment trust Anworth Mortgage Asset Corp. aren’t complaining.

Anworth’s shares popped 5 percent during the week ended July 8, closing at $5.20. In a week when markets from Shanghai to New York to Frankfurt tanked, that was enough to make it the biggest gainer of the week on the LABJ Stock Index. (See page 48.)

Anworth is a REIT that almost entirely invests in agency mortgage-backed securities, whose payments are backed by government-sponsored entities such as Fannie Mae and Freddie Mac. Nonagency mortgage-backed securities account for less than one-tenth of 1 percent of its holdings. The company also owns about 80 single-family Florida homes, which it leases to tenants.

As long as rates remain low, the mortgage-backed securities Anworth invests in hold their value and borrowers aren’t rushing to prepay their mortgages.

That keeps a steady stream of income going to shareholders, and the firm has been able to deliver to its investors a dividend yield of about 12 percent over the last year.

Chief Executive Lloyd McAdams acknowledged that some investors have expressed concerns about the effects of rising rates, but he said Anworth has been proactive in setting itself up for when that might happen.

In an email to the Business Journal, McAdams said Anworth has prepared for a possible rate hike by focusing on owning adjustable-rate mortgages, using interest rate hedges and financing its rental homes through fixed-rate loans.

But the events of the past week have led many to believe a rate rise won’t be coming soon. Jason Arnold, a managing director at RBC Capital Markets in San Francisco who covers the REIT, attributed Anworth’s modest surge to that view.

“That is probably the biggest driving force,” he said. “Especially looking at some of the other peers that were up.”

Another factor has been management’s recent buybacks of Anworth shares. McAdams said he believes the stock is undervalued considering the broader context.

“Anworth’s shares have recently traded at approximately a 20 percent discount to its book value,” he said. “In the past, during periods of high investor confidence in interest rates declining, Anworth frequently traded at values greater than its book value.”

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