The stock market took a plunge in March as investors started to realize the full severity of the coronavirus outbreak. But few corners of the market got slammed as hard as mortgage REITs.

The iShares Mortgage Real Estate Capped ETF (NYSE:REM), an index fund that that tracks the sector, dropped from a high of $48.39 in mid-February to a gut-wrenching $13.03 by the end of March. Thosee shares have since recovered to over $20 at time of writing, but remain down nearly 60% from their highs.

Mortgage REITs were supposed to be relatively safe income investments, albeit with a little leverage to juice the returns. Unfortunately, that leverage proved to be fatal when the storm hit.

With millions of Americans out of work due to coronavirus lockdowns and unable to pay their mortgages, bondholders feared the worst and dumped mortgage-backed securities, which in turn caused the mortgage REITs’ net asset values to fall, forcing the REITs themselves to sell even more mortgage bonds to meet margin calls.

Selling begets selling, and before the dust settled at the end of last month, the entire mortgage REIT sector was left in tatters.

But here’s the thing. Crashes like these always create opportunities. Some mortgage REITs will likely need to be recapitalized, and may not be in a position to pay dividends at previous levels for a long time, if ever. But others are still very healthy and are trading at discounts to net asset value we may never see again in our lifetimes:

• Annaly Capital Management(NYSE:NLY)
• AGNC Investment Corp (NYSE:AGNC)
• Two Harbors Investment Corp (NYSE:TWO)
• Dynex Capital (NYSE:DX)
• Capstead Mortgage Corporation (NYSE:CMO)
• MFA Financial (NYSE:MFA)
• Chimera Investment Corporation (NYSE:CIM)

These seven mortgage REITs are just too cheap to ignore.

Annaly Capital (NLY)

We’ll start with Annaly Capital Management, the largest and arguably best managed of all mortgage REITs, with a market cap of $9 billion.

Annaly manages a $99 billion portfolio of agency MBS. Agency MBS are securities issued by government sponsored enterprises like Fannie Mae and Freddie Mac and are safer than bank-issued MBS due to the implicit backing of the U.S. federal government.

Nevertheless, Annaly took some damage in March. Preliminary company-issued figures showed its book value declining from $9.66 per share to $7.40 to $7.50 as of March 30. As the value of MBS continues to improve due to aggressive buying by the Fed, I expect that book value is higher today.

But in any event, even using the March 30 estimates puts Annaly Capital’s price/book ratio at just 0.85.

At current prices, Annaly yields a juicy 16.8%. Between the yield and a potential return to book value, Annaly could end up returning something in the ballpark of 30% in the next year.

AGNC Investment Corp (AGNC)

Say “AGNC” out loud. Does it sound a little like “agency?”

That’s by design. AGNC Investment Corp is a large $7.2 billion mortgage REIT specializing in agency MBS. AGNC was founded in 2008, as the subprime mortgage crisis and financial market meltdown were coming to a head.

AGNC is considered one of the safest and most conservative mortgage REITS, but that didn’t stop it from getting its head bashed alongside with the rest of the sector last month. Shares have dropped from a high of $19.65 in February to just $6.25 at the March lows. At time of writing, the shares traded at $12.69.

Over its life as a public company, AGNC has mostly traded in a range of 0.8 to 1.2 times book value. The company estimated that its book value was approximately $13.60 as of March 31, which would suggest a current price/book ratio around 0.93, roughly in the middle of the range.

Book value is likely understated, however, suggesting AGNC is actually a lot cheaper than it looks. Management suggested in an April 8 memo that it believed the decline it book value to reverse as market conditions return to normal.

AGNC reduced its monthly dividend from $0.16 per share to $0.12 per share starting with the April 30 payment. But even at this reduced level, the stock still yields a very attractive 11%.

Two Harbors (TWO)

Next up is Two Harbors Investment Corp,  a hybrid mortgage REIT. Like Annaly Capital and AGNC Investment Corp, Two Harbors invests primarily in agency MBS. But the company also invests in mortgage servicing rights (MSR) and other mortgage related investments.

The portfolio has shifted slightly over the course of the past year, but as of year-end approximately 68% of the portfolio was invested in agency MBS, 19% in “to be announced” mortgage securities and other hedges, 9% in non-agency MBS and 5% in MSR. The company has since announced that it liquidated the non-agency MBS.

Two Harbors saw its stock price obliterated in the selloff, dropping from $15.85 to just $2.25. Shares have recovered to $4.88 at time of writing, but that’s still a full two-thirds below old highs.

Part of this is due to Two Harbors slashing its dividend to just $0.05 per quarter, down from $0.40 per quarter pre crisis.

The dividend cut helped to conserve cash, which was a sensible move to make when it appeared the world was ending. But that’s the sort of thing that causes investors to sell first and ask questions later.

Still, Two Harbors would seem like a steal at the moment, trading at just 40% of the company’s most recent book value estimate. You’re not getting much of a yield at today’s prices, but if you’re patient and don’t mind waiting a quarter or two for the company to consider raising the dividend, it’s hard to argue with the price.

Dynex Capital (DX)

Dynex Capital has held up relatively well compared to its peers, down about 25% from its highs. Normally, a 25% loss would be seen as a significant setback. But given the carnage in the sector, a 25% loss seems practically tame.

As with the other mortgage REITs in this article, Dynex has reduced leverage and reshuffled its portfolio over the past several weeks. We don’t have all of those details just yet, but we can get a decent idea about Dynex’s portfolio composition through its year-end reporting.

As of Dec. 31, Dynex had about 51% of its portfolio in agency residential MBS (i.e. home mortgages backed by Fannie Mae and Freddie Mac), 39% in commercial MBS (i.e. multifamily apartment mortgages backed by Fannie Mae and Freddie Mac) and 10% in interest-only commercial MBS.

This high focus on agency backing explains a good bit of Dynex’s resilience, but that’s not all. Dynex’s management was one of the few of any public company to really take the coronavirus seriously early. As early as Feb. 6, Co-CIO Smriti Popenoe said, “We view the coronavirus as exactly the type of unexpected trigger that can shift fundamental economic trends in an unfavorable direction.”

Because DX was prepared, entering the crisis with reasonable leverage, Dynex avoided major destruction to book value and maintained its dividend. At current prices, the stock yields 13.27%.

Capstead Mortgage Corporation (CMO)

Capstead Mortgage Corporation is the oldest publicly-traded mortgage REIT, with a track record going back to 1985. The top three executives at the company have a combined 75 years of experience in the industry. So suffice it to say, Capstead has survived and thrived through some market catastrophes.

Capstead is also one of the most conservative offerings today, with a focus on short-duration agency MBS composed primarily of adjustable rate mortgages.

Alas, that conservatism didn’t save the company from taking a tumble. After a disappointing earnings report, the company is trading at close to $5 per share, down from a 52-week high of $9.25.

Capstead’s book value was hit harder than some of its peers, and as of March 31 had fallen to $6.07. But at the current price of $5.05, that represents a 17% discount to book value, which isn’t too shabby.

On the upside, the company did maintain its dividend, with an attractive yield of 10.19%.

Capstead is neither the cheapest nor the highest-yielding mortgage REIT on this list. But given its focus on low-duration, variable-rate MBS, it does offer a degree of diversification when compared to the rest of the sector.

Chimera Investment Corporation (CIM)

Chimera Investment Corporation is a hybrid mortgage REIT investing in both agency and non-agency MBS. But the company does a lot more than that.

Rather than just buy MBS from others, Chimera acquires residential mortgage loans in order to securitize them and make their own own mortgage-backed securities. Approximately 54% of Chimera’s portfolio was invested in individual residential mortgage loans as of Dec. 31, loans that were in some stage of the securitization process.

While the model is a solid one, it hit snags during the coronavirus bear market as liquidity for non-agency MBS dried up. As a result, Chimera’s stock price collapsed from $22.99 to just $6.42 before recovering to $7.78 at time of writing.

Chimera released an estimate of its book value a few weeks ago. The company believes its portfolio of mortgages and mortgage securities to be worth at least $12.25 per share. That means that Chimera presently trades at a 36% discount to book value.

As of today, the dividend remains intact, giving investors a yield of over 24%. That might change, of course, as Chimera may still decide to cut. But at a 36% discount to book, that’s a risk worth taking.

MFA Financial (MFA)

I’ll wrap this up with a more speculative pick in MFA Financial. MFA was one of the absolutely worst-hit mortgage REITs. After a string of margin calls, the company managed to reach forbearance agreements with its repo lenders, which saved the company from insolvency and bankruptcy.

But it came at a steep cost. Through March 31, 2020, MFA estimates that GAAP book value per common share had dropped 35-40% from Dec. 31, 2019, levels to between $4.22 and $4.58. “Economic book value per share,” a non-GAAP financial measure that the company believes better captures its financial condition, decreased 45-50% over the same time frame, to between $3.72 and $4.09.

Those numbers are brutal. However, the carnage has created opportunity. Shares trade for $1.75 at time of writing. With the company’s survival no longer in question given the forbearance conditions in place, that means it trades for less than half of the company’s most conservative estimate of an already-depressed book value.

MFA had to suspend its dividend to conserve cash, and it won’t be reinstating it while in forbearance. So unlike other picks here, MFA is not an income play. But as a deep value play, it’s still very enticing.

Charles Lewis Sizemore, CFA is the principal of Sizemore Capital Management LLC. As of this writing, he was long NLY.