Redwood Trust (RWT) is a mortgage REIT focused on the non-agency residential and commercial mortgage markets. The company uses a unique tax-advantaged structure, with its investment portfolio held in a REIT and mortgage banking activities in taxable subsidiaries. This allows RWT to grow book value while paying a strong dividend, currently around 6% yield. RWT’s core business is acquiring jumbo residential mortgage loans and repackaging them into private label securities. It has demonstrated a strong track record with over $50 billion securitized and cumulative losses under 1%.
In addition, RWT is pursuing opportunities in commercial mortgages and new markets like mortgage servicing rights. It also invested in a proposed “WWE Network,” though challenges have delayed the launch. Non-core businesses like commercial lending and the proposed network are not core to the investment thesis but provide upside potential. Overall, the presentation argues RWT is well-positioned to generate 12-15% returns through its niche non-agency strategy and trades at a discount to its intrinsic value, suggesting an attractive investment opportunity.
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