Angel Oak Mortgage REIT: A Volatile Entry Point Masks Long-Term Value in Mortgage REITs

The mortgage REIT sector has long been a rollercoaster of volatility, and Angel Oak Mortgage REIT (AOMR) is no exception. Recent filings and price swings have sparked investor anxiety, but beneath the noise lies a compelling case for patient investors. Let’s dissect whether the $4.58 million Form 144 filing (452,700 shares) by Truist Financial Corporation signals caution—or opportunity.

The Insider Sale: A Liquidity Move, Not a Distress Signal

On May 15, 2025, Truist filed to sell 452,700 AOMR shares, valued at roughly $4.58 million based on the stock’s May 13 closing price of $10.17. Critics might interpret this as a red flag, but context matters. Form 144 filings are routine for institutional investors seeking liquidity, especially in thinly traded REITs.

The sale’s timing coincides with AOMR’s recent price rebound from a May 10 dip (see below), suggesting Truist may have simply capitalized on improved valuations. Crucially, the filing does not imply financial distress: AOMR’s fundamentals remain intact, and the sale volume (452,700 shares) is dwarfed by its 20+ million share float, limiting market impact.

Why the Near-Term Volatility?

AOMR’s stock tumbled to $7.62 on May 10—a 24% drop from its May 9 close—before rebounding to $10.17 by May 13. This volatility likely reflects broader mortgage REIT pressures, including rising interest rate uncertainty and investor rotation out of financials.

Yet the rebound highlights AOMR’s resilience. The stock’s May average of $9.65 (per forecasts) and its proximity to its 200-day SMA ($9.97) suggest a floor is forming. Patient investors should focus on the structural tailwinds in mortgage REITs.

AOMR’s Fundamentals: Dividends, Rates, and Portfolio Strength

1. Dividend Sustainability

AOMR’s dividend yield of ~8.5% (based on its recent $0.85 quarterly payout) is a cornerstone of its appeal. While REITs are cyclical, AOMR’s conservative leverage ratios (below 6x) and focus on long-duration agency mortgages shield it from abrupt rate shocks. The Q1 2025 10-Q noted increased income and disciplined debt management, reinforcing dividend safety.

2. Interest Rate Resilience

The market’s fear of rising rates has depressed mortgage REIT valuations, but AOMR’s hedging strategies mitigate this risk. Unlike some peers, it avoids heavy exposure to adjustable-rate mortgages, instead favoring fixed-rate agency-backed securities. This aligns with the Federal Reserve’s expected pause in rate hikes by mid-2025, creating a stable environment for coupon income.

3. Housing Market Resilience

Moomoo-tracked data shows mortgage REITs like AOMR often outperform when housing demand stabilizes. AOMR’s portfolio—weighted toward low-risk agency MBS—should thrive as the U.S. housing market inches toward equilibrium, with rental demand offsetting cyclical headwinds.

Sector Comparables: AOMR’s Undervalued Position

Compared to peers like AGNC Investment (AGNC) and Two Harbors (TWO), AOMR trades at a discount despite superior risk metrics.

REIT	P/Book	Dividend Yield	Leverage (x)
AOMR	0.85	8.5%	5.8
AGNC	0.92	9.2%	8.2
TWO	0.78	7.3%	7.5

While AGNC’s yield is higher, its elevated leverage raises risk. AOMR’s balance between yield and safety positions it as the sector’s best risk-reward trade.

The Case for Action: Buy the Dip, Own the Trend

The Form 144 filing has spooked short-term traders, but this is a buying opportunity for investors with a 3–5 year horizon. Key catalysts:

1. Technical Support: The $9.00–$9.50 range acts as a floor, with May’s average price of $9.65 offering a margin of safety.
2. Sector Rotation: Mortgage REITs often rebound when rates stabilize, and AOMR’s conservative profile will outperform speculative peers.
3. Dividend Compounding: An 8.5% yield, when reinvested, grows capital faster than nearly any bond or equity.

Final Verdict: Volatility is Your Friend

The Truist sale and May’s price swings are noise, not news. AOMR’s fundamentals—dividend stability, rate resilience, and portfolio quality—support a buy rating at current levels.

Recommendation: Use dips below $9.80 to accumulate positions. The stock’s May 15 close of $10.10 hints at near-term consolidation, but patient investors will be rewarded as the sector’s undervalued gems shine in 2025’s late-cycle market.

Stay patient. Stay long.