Orchid Island Capital(US:ORC) Seeking Alpha·2026-02-06 20:41Core Viewpoint - Orchid Island Capital (ORC) is an agency mortgage REIT with a historically poor performance track record, making it a less favorable investment option in many situations [2][14]. Group 1: Company Overview - ORC primarily invests in agency mortgage-backed securities and has not historically performed well, leading to significant capital erosion for investors [2][9]. - The current trading price of ORC is around its book value, which is considered too high given its poor historical performance [14]. Group 2: Performance Metrics - The book value and share price of ORC have shown a declining trend over time, with significant losses reported in various quarters [9][12]. - ORC's performance compared to other agency mortgage REITs has been notably poor, with substantial declines in total return percentages during various quarters [11]. Group 3: Investment Strategy - The investment strategy of ORC involves buying fixed-rate agency MBS and hedging duration risk using instruments like LIBOR swaps or futures contracts [10]. - Investors have occasionally found opportunities to trade ORC shares when valuations collapse below historical levels, although this is not currently the case [3][14]. Group 4: Financial Insights - The financial statements indicate that ORC has faced challenges with net interest income and has incurred losses on mortgage-backed securities [21]. - Management fees and operating expenses have increased, raising concerns about the sustainability of dividends for common shareholders [18][31]. Group 5: Market Sentiment - Investor sentiment towards agency mortgage REITs has improved recently, attributed to a reasonable spread between agency mortgages and Treasury rates, but caution is advised regarding reliance on historical performance [23][24]. - Preferred shares in the mortgage REIT sector are recommended for investors seeking lower volatility and more reliable dividend levels compared to common shares [27][28].