Two Harbors Investment (TWO) Stock: Weak On High Volume Today

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Two Harbors Investment ( TWO) as a weak on high relative volume 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 $29.0 million.
  • TWO has traded 717,778 shares today.
  • TWO is trading at 9.93 times the normal volume for the stock at this time of day.
  • TWO is trading at a new low 3.01% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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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, and other financial assets. The stock currently has a dividend yield of 10.2%. TWO has a PE ratio of 101.5. Currently there are 11 analysts that rate Two Harbors Investment a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Two Harbors Investment has been 2.4 million shares per day over the past 30 days. Two Harbors Investment has a market cap of $3.7 billion and is part of the financial sector and real estate industry. The stock has a beta of 0.55 and a short float of 1.2% with 1.42 days to cover. Shares are up 9.1% 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 attractive valuation levels, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 69.40% to -$203.06 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 18.92%.
  • The gross profit margin for TWO HARBORS INVESTMENT CORP is currently very high, coming in at 82.71%. Regardless of TWO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 20.79% trails the industry average.
  • 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 89.8% when compared to the same quarter one year ago, falling from $388.64 million to $39.66 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, TWO HARBORS INVESTMENT CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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