I am not an experienced REIT investor so I may be a bit off-base here. However, with RWT trading at approx. 75% of Book value, it seems to me that it would have limited downside in an otherwise volatile market. We may need to wait for the upside, but when the yield curve starts to curve again, I think we will see some movement. This stock seems to me very similar to the Oil stocks. Good value play - need to be patient and wait for the envirnoment to turn. Am I fooling myself or is there some logic here?
I view the approval of a share buyback program as an admission that the company can neither find nor generate via conduit mortgage assets at attractive levels. The problem is common to the entire REIT industry right now. Too many players are chasing the same assets, particularly in the commercial area. These guys are not the only ones looking for cheap residential mortgage assets, not by a longshot. I agree that the lack of buying by insiders is significant. A share buyback is a purchase of shares with stockholder's equity, and does not send the same signal as management putting its own money where its mouth is.
I always warn people who are ready to make decisions to buy these types of stocks based on their book value. Book value doesn't mean squat. It's a function of spreads that existed at the time of the purchase of the mortgage assets and some assumption about prepayment speeds. As we have seen, actual prepayments can be totally different from the assumption, and market spreads can change due to supply/demand and yield curve conditions. Both can lead to big restatements and write-downs. Don't buy it just because it's at a discount to book value.