Fannie Mae and Freddie Mac stocks are experiencing a significant rally today, driven by strong endorsements from influential investors Bill Ackman and Michael Burry. These market figures have spotlighted the mortgage giants as exceptionally undervalued assets, believing them to be poised for substantial gains. The renewed interest is largely fueled by Ackman's persistent efforts to terminate the government's conservatorship, asserting that the companies have more than repaid their bailout funds.
The current surge in Federal Home Loan shares began when Bill Ackman publicly declared his belief that Fannie Mae and Freddie Mac present a unique and "stupidly cheap" investment opportunity, with potential for a tenfold increase. This sentiment was quickly echoed and amplified by Michael Burry, widely known from "The Big Short," who underscored the rarity of such a market anomaly. Burry has consistently supported Ackman's stance on ensuring fair treatment for shareholders of these entities, deeming it crucial for the overall integrity of the financial system.
Ackman's advocacy extends to intensifying his campaign against the federal conservatorship that has overseen Fannie Mae and Freddie Mac since the 2008 financial crisis. He has vociferously criticized the government's Net Worth Sweep, labeling it as "outright theft" for diverting all company profits to the Treasury. Ackman contends that the initial $193 billion bailout has been fully reimbursed, with an additional surplus of approximately $25 billion. He has urged political leaders, including former President Donald Trump, to honor the original agreements and cease the sweep, invoking Trump's past criticisms of the policy.
This investor pressure coincides with significant shifts in U.S. housing policy. The administration recently instructed Fannie Mae and Freddie Mac to acquire $200 billion in mortgage-backed securities to help stabilize housing affordability amidst fluctuating interest rates. Additionally, the Federal Housing Finance Agency (FHFA) has relaxed stringent roofing insurance mandates, which is expected to reduce costs for homebuyers and signal a more active, supportive role for these government-sponsored enterprises in the housing market.
From a technical analysis perspective, Freddie Mac (FMCC) is trading around 16% above its 20-day Simple Moving Average (SMA) but remains about 26.4% below its 100-day SMA, indicating a short-term upward movement within a broader downtrend. Its Relative Strength Index (RSI) of 31.75 suggests an easing of selling pressure, nearing oversold territory. The Moving Average Convergence Divergence (MACD) shows a bullish configuration at -0.6014 against a signal line of -0.6326, hinting at improving momentum despite still being in negative territory. Key resistance is observed at $6.50, with support at $6.00.
Similarly, Fannie Mae (FNMA) is positioned approximately 17% above its 20-day SMA but 23.8% below its 100-day SMA, signaling a short-term recovery within a long-term decline. Its RSI stands at 30.30, on the cusp of oversold and neutral zones, indicating a reduction in selling pressure. The MACD, at -0.6991 versus a signal line of -0.7121, indicates a bullish crossover and improving momentum. Key resistance is at $7.00, with support at $6.00. Both stocks recorded substantial gains on Monday, with Fannie Mae up 39.71% to $6.79 and Freddie Mac up 38.13% to $6.05.
The recent surge in Fannie Mae and Freddie Mac's stock prices reflects a renewed confidence among investors, particularly following strong endorsements from prominent market figures. This movement is not just a speculative rally but is underpinned by ongoing efforts to reform the companies' conservatorship and supportive governmental housing policies. The technical indicators suggest a bullish momentum in the short term, positioning these mortgage entities as compelling opportunities for investors.