Trade-Ideas LLC identified

Two Harbors Investment

(

TWO

) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Two Harbors Investment as such a stock due to the following factors:

  • TWO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $22.4 million.
  • TWO has traded 813,745 shares today.
  • TWO traded in a range 203.2% of the normal price range with a price range of $0.18.
  • TWO traded above its daily resistance level (quality: 2 days, meaning that the stock is crossing a resistance level set by the last 2 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on TWO:

Two Harbors Investment Corp. operates as a real estate investment trust (REIT) that focuses on investing in, financing, and managing residential mortgage-backed securities (RMBS), residential mortgage loans, mortgage servicing rights, commercial real estate and other financial assets. The stock currently has a dividend yield of 10.7%. TWO has a PE ratio of 1. Currently there are 8 analysts that rate Two Harbors Investment a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Two Harbors Investment has been 2.8 million shares per day over the past 30 days. Two Harbors Investment has a market cap of $3.0 billion and is part of the financial sector and real estate industry. The stock has a beta of 0.52 and a short float of 1.3% with 1.74 days to cover. Shares are up 6.7% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Two Harbors Investment as a

hold

. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • Net operating cash flow has significantly increased by 74.35% to -$131.68 million when compared to the same quarter last year. In addition, TWO HARBORS INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of 11.54%.
  • The gross profit margin for TWO HARBORS INVESTMENT CORP is rather high; currently it is at 68.68%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, TWO's net profit margin of -72.97% significantly underperformed when compared to the industry average.
  • The share price of TWO HARBORS INVESTMENT CORP has not done very well: it is down 16.37% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 193.8% when compared to the same quarter one year ago, falling from $94.79 million to -$88.93 million.

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