The Curious Case of Chimera Investment Corporation
With shares of Chimera Investment Corporation (NYSE:CIM) trading at around $2.64, is CIM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Have you ever read an ad in the back of a newspaper that states you can make $1,000 per day from home? It’s usually for assembling products, addressing and mailing envelopes, or for sitting on your couch and analyzing TV commercials. You might have been sold on such an ad in your earlier and more naïve years, but you learned your lesson quickly. You had to pay for something that was worth nothing, which is never a good strategy. You also learned that some things in life are indeed too good to be true.
Chimera Investment Corporation is a REIT that invests in residential and commercial mortgage loans. We have seen some scandalous behavior in this industry in the past, but would Chimera Investment Corporation really press its luck in this environment? With enormous margins, a 13.50 percent yield, a Forward P/E of 6.16, and operating cash flow over $400 million, this looks like a great investment. In addition to those impressive factors, insiders have been buying at levels higher than where the stock is currently trading, which is often a good sign.
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On the other hand, this is a company that had a delay in its 2011 annual report. You might be forgiving enough to let that slide, but what if Chimera Investment Corporation missed the deadline for three quarterly reports? A long might attempt to come up with all the excuses in the world, but this means either one of two things. One, there are bad intentions. Two, there is incompetence. Do either of those scenarios make you feel comfortable? Chimera Investment Corporation also plans on refilling all financial statements since Q3 2008. This will lead to an estimated reduced income of 66 percent.
Let’s take a look at some more important numbers.