ARR Short Interest Slides 14% in One Week

ARMOUR Residential REIT saw short interest drop sharply over the past week even as utilisation climbed back near the 52-week high. Options flow turned historically bullish. Analysts nudged targets higher post-earnings.

Price action & positioning

ARR closed at $17.62 on April 24, up 0.69% on the day. The stock is flat over the past week but has rallied 10.2% over the past month. That puts shares just 4.3% below the analyst average target of $18.38.

Short interest & lending

Short interest fell 14.2% over the past week to 11.84 million shares, equal to 10.6% of the float. That marks the lowest level since early April, down from a peak of 13.8 million shares on April 15. Days to cover sits at 4.04 according to the latest FINRA data. Over the past month, short interest is up just 2.3%.

Cost to borrow dropped 19.2% over the week to 0.74%. CTB has been volatile, spiking above 1.25% on April 15 before pulling back to current levels. The borrowing rate is roughly flat over the past 30 days.

Utilisation stands at 51.3%, up from 47.0% a week ago. That's the highest reading since April 15, when utilisation hit the 52-week peak of 57.2%. Over the past month, utilisation has climbed from the low 40s to current levels.

Options flow

The put/call ratio collapsed to 0.26 on April 24, the lowest reading in the past 52 weeks. The z-score sits at -1.77, indicating extreme bullish sentiment relative to the 20-day mean of 0.61. PCR spent most of March and early April in the 0.70–0.80 range before plunging in the past week.

Analyst consensus

ARR has an average price target of $18.38 across three covering analysts. UBS analyst Douglas Harter raised his target to $18 from $17.50 on April 24 while maintaining a Neutral rating. Jones Trading's Jason Weaver cut his target to $19 from $20 on April 23 but held a Buy rating. Compass Point's Jason Stewart initiated coverage in December with a Buy rating and an $18.50 target.

Bulls point to a projected 10.4% book value increase if MBS spreads tighten 25 basis points, plus manageable leverage at 8.1x. Bears note the economic net interest spread compressed to 177 basis points from 183, and potential Fed MBS purchases could drive prepayment risk and lower reinvestment yields.

Valuation & factor positioning

The P/E ratio stands at 5.75, up 0.43 points over the past month. Price-to-book is 0.99, up nearly 10% over 30 days. Earnings yield (EP) is 0.17, down slightly from a month ago.

ARR ranks in the 70th percentile for dividend score. Short score ranks in the 8th percentile, reflecting the stock's presence among the most-shorted names. DTC and utilisation rank in the 11th and 13th percentiles, respectively.

Institutional positioning

Vanguard added 249,900 shares as of March 31, bringing its stake to 12.0 million shares (9.6% of the company). BlackRock increased by 48,717 shares to 17.5 million (14.1%). Two Sigma built a 1.76 million share position (1.4%), adding 1.72 million shares in Q4. Marshall Wace cut its stake by 1.14 million shares to 1.36 million, and D.E. Shaw trimmed 127,419 shares to 1.38 million.

Insider activity

Insiders were net buyers of 11,988 shares over the past 90 days, worth $215,658. Most recent trades on February 24 were small award grants to directors and executives. CEO Scott Ulm sold 1,352 shares at $17.89 for $24,187. CIO Sergey Losyev sold 370 shares at $17.89 for $6,619. CFO Gordon Harper received a 4,000-share award.

What to watch

ARR is scheduled to report earnings on April 30. The company has four recent earnings dates clustered around late April, with the next event set for midday April 30.