If You Invested $1,000 In New Residential Investment Stock One Year Ago, Here's How Much You'd Have Now

Investors who have owned stocks in the past year have generally experienced some big gains. In fact, the SPDR S&P 500 ETF Trust SPY total return over the last 12 months is 28.8%. But there is no question some big-name stocks performed better than others along the way.

New Residential’s Bumpy Ride: One company that has been a disappointing investment in the past year has been mortgage REIT New Residential Investment Corp NRZ.

Related Link: If You Invested $1,000 In New Residential Mortgage Capital Stock One Year Ago, Here's How Much You'd Have Now

Shares of New Residential and other mortgage REITs were crushed in March 2020 as the pandemic created incredibly difficult financial conditions for the companies.

Recession fears tanked the value of New Residential’s mortgage-backed securities (MBS). The company was ultimately forced to sell assets in unfavorable market conditions to shore up its balance sheet. It was also forced into a dividend cut.

Before the crisis, New Residential focused on originating mortgages that didn’t qualify to be purchased by Federal National Mortgage Association FNMA or Federal Home Loan Mortgage Corp FMCC. The lack of liquidity in the mortgage market during the COVID-19 crisis prompted New Residential to completely shift its business model to focus on mortgages that met Fannie Mae and Freddie Mac’s purchase qualifications.

At the beginning of 2020, New Residential shares were trading at $16.16. By the beginning of March, the stock was down to $15.68 as news of the coronavirus spreading in China prompted concerns about a U.S. pandemic.

When the market crashed during the U.S. COVID-19 outbreak in March, New Residential shares dropped as low as $2.91 during the height of the pandemic fears.

When the market bounced off pandemic lows, New Residential began to rebound as well. The stock reached $9.42 per share in June before the recovery rally fizzled out.

New Residential Mortgage regained the momentum of the broader market in the second half of 2020. The stock was back up above $10 by the end of the year.

New Residential In 2021, Beyond: As mortgage market conditions improved in 2021, New Residential started acquiring smaller lenders and expanding its market share. Its recent buyout of Genesis Capital, which specializes in loans to professional real estate developers, also helps reduce New Residential’s exposure to potential Federal Reserve interest rate hikes in 2023.

New Residential stock hit its 2021 highs of $11.81 in November before pulling back from its highs to finish off the year. Today, shares are hovering around $10.80.

New Residential investors who bought the REIT one year ago and held on hoping for a 2021 recovery have generated a lackluster return on their investment at this point. In fact, $1,000 in New Residential stock bought on Dec. 22, 2020, would be worth about $1,167 today, assuming reinvested dividends.

Looking Ahead: Analysts are expecting bullish price action from New Residential in the next 12 months. The average price target among the 11 analysts covering the stock is $13, suggesting a 19.7% upside from current levels.

Image by Tumisu from Pixabay