Investors who have owned stocks in the last 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.
Invesco Mortgage’s Bumpy Ride: One company that has been a disappointing investment in the past year has been mortgage REIT Invesco Mortgage Capital Inc IVR.
Shares of Invesco 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 Invesco’s mortgage-backed securities (MBS). The company had used these assets as collateral to borrow against, so this drop in value prompted the company’s leaders to demand additional cash as collateral instead. When Invesco Mortgage tried to sell some of its assets to raise that cash, the MBS market was so illiquid at the time that it was unable to find buyers.
Invesco ultimately entered a forbearance agreement with its creditors, which allowed the REIT time to sell assets at more reasonable prices. Following its crisis, the company shifted its business model to focus on government-guaranteed mortgages.
Invesco Mortgage was a hot day trading stock on Robinhood Markets Inc HOOD after the stock’s share price collapsed in 2020. But hopes of a long-term rebound to anywhere near the stock’s pre-pandemic highs seem unlikely at this point.
At the beginning of 2020, Invesco Mortgage shares were trading at $16.64. By the beginning of March, the stock was down to $16.33 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, Invesco Mortgage shares dropped as low as $1.82 during the height of the pandemic fears.
When the market bounced off pandemic lows, Invesco Mortgage began to rebound as well. The stock reached $8.40 per share in June before the recovery rally fizzled out.
Invesco Mortgage didn’t maintain the momentum of the broader market in the second half of 2020. In fact, the stock was back below $3 by the end of July.
Invesco Mortgage In 2021, Beyond: Invesco Mortgage stock hit its 2021 highs of $4.60 in June before a disappointing earnings report sent the stock tumbling once again. Today, shares are hovering around $2.90.
Invesco Mortgage investors who bought the 2020 dip 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 Invesco Mortgage stock bought on Dec. 15, 2020, would be worth about $987 today, assuming reinvested dividends.
Looking Ahead: Analysts are expecting little price action from Invesco Mortgage in the next 12 months. The average price target among the two analysts covering the stock is $3, suggesting a 4.1% upside from current levels.
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