On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the biedexmarkets.com.com Publishing Guidelines.
Reddit investors have been hustling hard this week on squeezing meme stocks. Wendy’s (NASDAQ:WEN), ContextLogic (NASDAQ:WISH), and of course, AMC Entertainment (NYSE:AMC) all went moon-bound this week. Now, it’s time for the subreddit to reel in a big fish with some technical analysis. Invesco Mortgage Capital (NYSE:IVR) stock seems to be that big fish. Now, retail traders are putting their heads together and deciding that the REIT market holds the next rocket.
Mortgage REITs might not look like a great bet right now for the average investor. Although some experts are betting on the housing market continuing to heat up, others think we are in a bubble.
In the latter scenario, the logic highlights that consumer prices are rising and investors are worrying about inflation. The Federal Reserve has kept interest rates at near-zero levels, but the central bank will eventually have to taper its accommodative policy. Given that low interest rates are a huge driver of demand in the housing market, these changes could see things cool down.
In this instance, the market does not lend itself nicely to mortgage REITs.
Invesco Mortgage Capital has it even harder than Fannie Mae (OTCMKTS:FNMA) or Freddie Mac (OTCMKTS:FMCC). IVR takes on non-agency residential mortgage-backed securities (RMBSs) as a sizable portion of its business.
With speculation brewing over when exactly the housing bubble will burst, there are worries about these RMBSs falling apart.
Reddit Is Rallying Behind IVR Stock
One can see that there are a number of factors that stack up against the mortgage REIT. This reality has led some investors to bet against the stock, leaving 17.5% of its short being sold short.
But everybody knows now that when short interest gets higher, the likelihood of a Reddit tidal wave goes up. And of course, r/WallStreetBets is abuzz with IVR talk; mentions of IVR stock on the subreddit are up over 1,250% in 24 hours.
One poster drew up their deep dive into IVR and how the housing bubble will in fact aid mortgage REITs like IVR. The theory is up for debate, and only time will tell if Redditors or short sellers are correct. In the meantime, though, the retail trading legion is buying up shares of IVR stock, catalyzing a squeeze today.
IVR stock is up big in trading volume, seeing 129 million shares trading so far, as compared to a daily average of less than 7.5 million. The stock is up 21%.