Invesco Mortgage common stock and preferred shares carry significant risk, with IVR-C being severely overpriced and offering low yield relative to alternatives. IVR-C's stripped yield is only 7.63%, and its annualized yield to call is about 8.2%, both insufficient for the high risk involved. The floating rate on IVR-C starts in 2027, and its floating spread is only 5.289%, making it less attractive compared to lower-risk options like AGNCN.
In a notable move within the investment community, Invesco Ltd. (Trades, Portfolio) recently adjusted its holdings in Veeco Instruments Inc. (VECO, Financial), a key player in the semiconductor sector.
The high-flying Nasdaq-tracking ETF isn't always the best choice for most investors.
Invesco Mortgage had a slightly underperforming quarter, with a 2.3% variance in BV and core earnings/EAD matching closely to projections. IVR's mis-timed asset purchases and decreased hedging coverage ratio negatively impacted BV, while core earnings remained stable due to offsetting factors. IVR is priced at a discount compared to peers due to significant BV and economic losses over the past 24 months, despite strong core earnings.
A solid AUM balance, global footprint and efforts to bolster operating efficiency are expected to continue supporting IVZ amid weak top-line performance.
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JPMorgan's successful ETFs inspired Invesco to launch QQA, a NASDAQ 100 tracking fund with ELNs containing option strategies and money market holdings for income and potential volatility reduction. QQA's projected 10.26% distribution rate is competitive, but its limited history and lack of transparency in ELN and options strategies warrant a Hold rating. The fund's hedge fund-like operations and insufficient performance data necessitate waiting for clearer guidelines and more historical performance before making a definitive investment decision.
I believe Invesco Mortgage Capital Inc. faces significant risks from rising prepayment rates and spread risk, which could devalue its MBS portfolio and impact returns. Lower liquidity at the liability level can occur if U.S. economic variables don't improve. Moreover, I anticipate higher credit risk in 2025, which might add to funding uncertainty and refinancing. Regression analysis illustrates the mREIT's potential in a stable market environment. However, I don't think a stable market outlook is warranted.
The Invesco QQQ has ridden large technology stocks to massive long-term gains. Growth opportunities in end markets like AI and cloud computing remain intact.
Several hedge fund managers sold Nvidia stock in the second quarter, while purchasing shares of the Invesco QQQ Trust. The Invesco QQQ Trust tracks several companies well positioned to monetize artificial intelligence, including Microsoft, Amazon, and Alphabet.