Market Overview

Ackman Sees Fannie Mae & Freddie Mac Rising More Than 400 Percent


Bill Ackman sent shares of Fannie Mae (OTC: FNMA) and Freddie Mac (OTC: FMCC) almost ten percent higher when he spoke about the companies at the Ira Sohn conference Monday.

Shares shot almost one percent higher when Ackman just announced he would be talking about the companies. Both issues continued to trade higher through the regular hours session.

Ackman boldly said the companies are each worth $23.00 per share. They closed at $4.10 (FNMA) and $4.23 (FMCC) Monday. A 23 dollar price target is 461 percent and 444 percent higher than Monday’s closing price, respectively.

A key reason for Ackman’s position in Fannie and Freddie are the low risk characteristics of their businesses. He emphasised that the organizations only take on the credit risk of the underlying borrower and that banks will not be able to step in.

In order to maintain liquidity and flexibility in the United States housing market, these organizations are needed. Ackman pointed out that receiving a royalty on every mortgage in America is a great business.

For the companies to operate at the capacity Ackman believes they are capable of, they will need a significant increase in capital, which Ackman thinks they will be able to generate themselves.

After shares rocketed higher on strong volume through the close, both issues are seeing decent after hours volume. Fannie Mae last traded at $4.24 and Freddie Mac last traded at $4.20.

Posted-In: Bill AckmanNews Hedge Funds Movers Media General


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