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Will FNMA’s New Leadership and Strategy Drive Long-Term Growth?

Jack KelloggAvatar
Written by Jack Kellogg Reviewed by Tim Sykes Fact-checked by Ellis Hobb
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Federal National Mortgage Association’s stock rallied on Thursday, trading up by 9.01 percent, as investors responded positively to news of improved lending conditions in the housing market and a promising shift in mortgage-backed securities strategy, pointing towards potential growth and increased investor returns.

Key Market Developments

  • With the appointment of Scott D. Stowell, a seasoned veteran in homebuilding, Fannie Mae aims to enhance its strategy in mortgage credit and affordable housing. The move could bolster their recent initiatives to widen mortgage access and finance affordable rentals.

Candlestick Chart

Live Update At 11:37:08 EST: On Thursday, December 05, 2024 Federal National Mortgage Association stock [NASDAQ: FNMA] is trending up by 9.01%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

  • Fannie Mae released its October monthly summary, focusing on its gross mortgage portfolio and other key financial metrics. This summary underscores the company’s ongoing commitment to equitable and sustainable homeownership.

  • Unveiling their 2025 Benchmark Securities Issuance Calendar, Fannie Mae plans regular announcements on securities offerings, likely impacting their liquidity and attracting more investors.

  • The economic outlook from Fannie Mae’s team reveals a cautious optimism with a revised projection of a modest 4% increase in home sales for 2025. An uptick is expected two years later, despite rising mortgage rates now impacting the market.

Financial and Stock Performance Overview

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Fannie Mae’s latest earnings report paints a diverse picture. Revenue stood at a staggering $30.29 billion, yet profitability metrics reveal much room for improvement. While boasting a solid pre-tax profit margin of 70.9%, other metrics, like the total profit margin, indicate challenges — sitting at a disappointing -0.05%. On the asset side, Fannie Mae is a giant, with total assets valued at $4.33 trillion. Still, operational concerns such as a negative BVPS and return on equity of -3.52% highlight significant fiscal hurdles.

More Breaking News

The stock prices of FNMA also faced volatility as noted from recent trading sessions. The opening price of $2.33 in early December fell to $2.54, indicating cautious investor sentiment amid ongoing structural changes and strategic initiatives by the company. Historical highs and lows fluctuated significantly, indicating a stock still swayed by broader financial and economic conditions.

The Impact of News on FNMA’s Market Trajectory

Scott D. Stowell’s appointment is a pivotal moment for Fannie Mae. His deep-rooted industry experience is expected to help steer the company toward its ambitious goals of expanding mortgage credit access and affordable housing finance. While his expertise may bring about innovative approaches and fresh perspectives, actualizing such strategies will be paramount in ensuring FNMA’s long-term growth trajectory is realized.

Fannie Mae’s recent initiatives, particularly its October 2024 monthly summary, provide stakeholders with a comprehensive view of its financial footing. The report emphasizes the importance of sustainable practices in maintaining the flow of mortgage-backed securities and other guarantees. As these initiatives align with the company’s mission, they may help bridge gaps in affordability and sustainability, fostering investor confidence.

The announcement of the 2025 Benchmark Securities Issuance Calendar signals FNMA’s intent to maintain robust technology and financial infrastructure, enabling steady securities announcements that promise to affect overall investor interest. A stable issuance timetable may offer investors the predictability they yearn for during times of macroeconomic shifts.

The forecasted rise in home sales, although revised downwards, still hints at potentially favorable market shifts by 2026. In tandem with a likely pause in hawkish monetary policies and an expected decrease in oil prices, Fannie Mae’s strategic positioning could indeed enhance its appeal in forthcoming periods.

Conclusion

Through strategic appointments and a clear vision in releasing timely securities, Fannie Mae is setting the stage for potential growth amidst economic headwinds. Though the stock’s recent performance underscores the inherent challenges, FNMA’s ongoing commitment to affordable mortgage access and solidifying its strategic framework bodes well for the future. As millionaire penny stock trader and teacher Tim Sykes says, “Small gains add up over time; focus on building wealth gradually, not chasing jackpots.” This mindset resonates in the broader market as traders watch keenly, balancing current fiscal turbulence against anticipated resilience and advancement in the homebuilding and mortgage industries.

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The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”