Sometimes a story is just SO out there – so unbelievable – that you can’t NOT talk about it. That’s the case with the “phoenix” known as the Federal National Mortgage Association (FNMA)...or in colloquial terms, Fannie Mae.
If you analyzed or followed the housing market as closely as I did from 2003-2010, you’re VERY familiar with this company. Created by the federal government decades ago to help mortgage lenders extend and securitize home loans – and keep a steady stream of money flowing into the housing market – it blew up spectacularly during the Great Financial Crisis. That’s because we suffered the worst housing market downturn...and surge in mortgage delinquencies and foreclosures...in modern times.
The government ultimately bailed it out, along with its twin Freddie Mac, in 2008. It has operated in federal conservatorship ever since. But a publicly traded equity remnant never went away. It kept trading in the over-the-counter market. Several prominent hedge funds bought in – even as it languished for years trading for less than a buck.
Now, check out the MoneyShow Chart of the Day. It shows what happened to FNMA in the last 12 months.
Fannie Mae (FNMA)
Source: StockCharts.com
Yep. That’s a 796% gain. Widely held AI darling Palantir Technologies Inc. (PLTR) is “only” up 537% during that same time.
How could this be? Because the Trump Administration is seriously considering selling a large chunk of its holdings in the firm – anywhere from 5% to 15%. That could raise up to $30 billion, and value the two companies at a combined $500 billion. Not to mention restore respectability to the remnant shares.
Any transaction could take a LONG time to arrange. It could also take any number of forms. The president could also decide not to move forward. That’s because some worry that if the firms are partially pushed out from under the federal government’s umbrella, it could cause mortgage rates to rise.
But in the meantime, speculators who held their noses and bought these stocks have made out like crazy.
One final note: A contributor to our MoneyShow 2025 Top Pros Top Picks Report – Nicholas Vardy of The Global Guru – made FNMA his “speculative play.” His words: “Think of any position you take in FNMA as a call option — highly volatile with terrific potential upside, but with the benefit of the option not expiring or experiencing time decay.” Nice job!
