Investors who bought stocks during the COVID-19 market crash in 2020 have generally experienced some big gains in the past two and a half years. But there was no question some big-name stocks performed better than others since the pandemic bottom.
New Residential’s Bumpy Ride: One company that has been an impressive investment in the past two and a half years has been mortgage REIT New Residential Investment, now known as Rithm Capital Corp (NYSE:RITM).
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New Residential and other mortgage REITs were crushed in March 2020 as the pandemic created incredibly difficult financial conditions for the companies.
Recession fears tanked the value of New Residential’s mortgage-backed securities (MBS). The company was ultimately forced to sell assets in unfavorable market conditions to shore up its balance sheet. It was also forced into a dividend cut.
Before the crisis, New Residential focused on originating mortgages that didn’t qualify to be purchased by Federal National Mortgage Association (OTC:FNMA) or Federal Home Loan Mortgage Corp (OTC:FMCC). The lack of liquidity in the mortgage market during the COVID-19 crisis prompted New Residential to completely shift its business model to focus on mortgages that met Fannie Mae and Freddie Mac’s purchase qualifications.
At the beginning of 2020, New Residential shares were trading at $16.16. By the beginning of March, the stock was down to $15.68 as news of the coronavirus spreading in China prompted concerns about a U.S. pandemic.
When the market crashed during the U.S. COVID-19 outbreak, New Residential shares dropped as low as $2.91 on April 3, 2020, during the height of the pandemic fears.
When the market bounced off pandemic lows, New Residential began to rebound as well. The stock reached $9.42 per share in June before the recovery rally fizzled out.
New Residential Mortgage regained the momentum of the broader market in the second half of 2020. The stock was back up above $10 by the end of the year.
New Residential In 2023, Beyond: As mortgage market conditions improved in 2021, New Residential started acquiring smaller lenders and expanding its market share.
New Residential stock hit its 2021 highs of $11.81 in November before pulling to finish off the year. The stock dipped back to as low as $6.86 in September 2022 after New Residential internalized its management and rebranded as Rithm Capital in June 2022. Today, shares are hovering around $8.44.
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Still, investors who bought New Residential on the day it hit its 2020 pandemic low and held on have generated a positive return on their investment. In fact, $1,000 in New Residential stock bought on Apr. 3, 2020, would be worth about $3,394 today, assuming reinvested dividends.
Looking ahead, analysts are expecting Rithm’s stock to continue to recover in the next 12 months. The average price target among the 11 analysts covering the stock is $12, suggesting 41.8% upside from current levels.