$FEDERAL NATIONAL MORTGAGE ASSOC (FNMA.US)$ and $FREDDIE MAC (FMCC.US)$ shares soared on Monday afternoon after billionaire investor Bill Ackman touted the stocks on social media.
The Details: Ackman, CEO of Pershing Square hedge fund, recommended the stocks as an investment with "large asymmetric upside versus downside" in a post on the social media platform X.
Ackman said he sees the potential for Fannie Mae and Freddie Mac to come out of conservatorship in the next two years. Ackman pointed to the incoming Trump administration as a factor making the end of conservatorship more likely for the home lenders.
I am often asked for stock recommendations, but generally don't share individual names unless I believe the risk versus the reward is extraordinarily compelling.
As we look toward 2025, one investment in our portfolio stands out for large asymmetric upside versus downside so I...— Bill Ackman (@BillAckman) December 30, 2024
Fannie Mae and Freddie Mac were placed under conservatorship in September 2008 in response to the deterioration of the housing market during the 2008 financial crisis. The Federal Housing Finance Agency became the conservator to preserve and conserve the assets and to provide stability to the housing and mortgage markets.
Ackman said that the companies have built $168 billion of capital since 2019 and described this as a "fortress-level of capital for guarantors of fixed-rate, first mortgages to creditworthy, middle class borrowers."
Ackman said he estimates the value of each company at approximately $34 per share, assuming the companies could IPO in the fourth quarter of 2026. He added that he sees the IPOs priced at approximately $31 per share accounting for a 10% discount to their value.
He also pointed to the benefits of ending the conservatorship for the federal government including the removal of approximately $8 trillion in liabilities and the potential to generate more than $300 billion in profits.
"Trump likes big deals and this would be the biggest deal in history. I am confident he will get it done," Ackman wrote.
FNMA, FMCC Price Action: Fannie Mae shares ended Monday's session up 36.14% at $3.39 and Freddie Mac shares closed 33.87% higher at $3.32.
