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Update: Two Harbors Continues With Its Impressive Portfolio Composition

I maintain my bullish stance on Two Harbors Investments (TWO); the company has an impressive and diversified portfolio composition, which will augur well for its core earnings power in upcoming quarters. Also, the company has large exposure to high yield and long duration assets, which is the correct strategy in the current low interest rate environment. In my opinion, the Fed will not increase rates in mid-2015 due to weak global economic conditions and slacks in the labor market. Along with significant exposure to high duration assets, the company's initiatives to increase its exposure to high yield credit portfolio will support its future performance. The company's diversified portfolio will bode well for stock valuation in 2015.

The company reported a core EPS of $0.23 for 4Q'14, missing consensus estimates of $0.24 per share. The earnings miss was primarily driven by high funding cost, which weighed on its core EPS. I… Read More …