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Is Fannie Mae’s Stock Poised for a New Era of Growth?

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Written by Matt Monaco Reviewed by Jack Kellogg Fact-checked by Tim Sykes
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Despite the Judicial victories over Trump appointees bolstering confidence in the Federal National Mortgage Association’s regulatory landscape, leading to a positive sentiment, on Friday, Federal National Mortgage Association’s stocks have been trading up by 7.78 percent.

Recent Market Movements

  • Stock prices of Fannie Mae surged 21%, reaching $4.16 as investors rally behind newfound optimism.

Candlestick Chart

Live Update At 11:37:40 EST: On Friday, January 17, 2025 Federal National Mortgage Association stock [NASDAQ: FNMA] is trending up by 7.78%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

  • Bill Ackman’s vision for lower capital levels at Fannie Mae and Freddie Mac boosts market sentiment.

  • Treasury and Federal Housing Finance Agency signal Fannie Mae’s potential release from conservatorship.

  • The Trump administration’s nomination of Bill Pulte as FHFA Director sparks moves towards housing finance reform.

  • Market excitement grows as Craig Phillips’ hiring at Freddie Mac suggests a privatization push.

Quick Overview of Financial Performance

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Financially, Fannie Mae paints an interesting picture. Quarter three’s earnings showcase impressive revenue figures, albeit coupled with substantial challenges. With a reported revenue of nearly $30B, it becomes increasingly clear this organization rests on significant financial foundations. However, the profit margins are a mixed affair. A pretax profit margin flaunts healthy numbers, marking 70.9% efficiency. Yet, the negative total profit margin, resting at an eyecatching -0.05%, indicates a landscape rife with complexities and possible restructuring necessities.

From the cash flow reports, stories emerge. Investment activities outshine, driving a positive cash influx of $45B, though counterbalanced by staggering financing outflows near $40B. A balancing act, indeed, highlighting perhaps why market players eye with both opportunity and caution.

The balance sheet reveals assets that tell a tale of immense scale—$4.33 trillion in total assets, including a formidable cash reserve climbing upwards of $38B. Comparing these with liabilities, however, presents an environment ripe with obligations, exceeding $4.24 trillion. These figures whisper of opportunities intermingled with prudent risk assessments.

As the stocks see a flurry of investor interest, the key ratios shelter under a cloud of historical measures. A price-to-cash flow ratio steeped in negativity, juxtaposed against a promising low price-to-sales ratio of 0.21, shapes an enigmatic field of possibilities. Management effectiveness metrics further weigh the scene, with returns on equity and assets in adverse territories, beckoning strategic imaginations to bridge these differences.

Understanding the Momentum

The rise in Fannie Mae’s stock isn’t merely a passing breeze. It heralds deeper financial nuances and market optimism. Bill Ackman, a seasoned investor, lights the path forward, advocating for lower capital requirements, intending to ease privatization’s path without rattling the mortgage ecosystem. His words revitalized investor confidence significantly, underpinned by a clear endorsement from financial advisory voices like Keefe Bruyette.

In tandem, the Treasury and FHFA’s recent amendments signal optimism, perhaps laying the groundwork for independence from government oversight. Investors, now on edge with anticipation, sense potential catalysts that may shift the market’s foundation more independently. The Trump-administration-approved pick of Bill Pulte adds further fervor. His association with housing promises reformist ideologies, a sparkle in the eyes of those tied to financial markets wary of static reforms.

As news of Craig Phillips joins the chorus, a broader narrative unfurls, one directed towards unmatched prospects of privatization. Investors, though warned of possible dilution effects, find hope in the possibilities Phillip’s alignment signals. The tapestry of market movements jumps from expectations to solid prospects, each news piece weaving its tale of ascent and potential transformation.

More Breaking News

Unlocking the Future

The tale woven by recent news stories and financial performances carves a complex longitudinal path for Fannie Mae. With both overarching positive sentiments and underlying cautionary notes, traders grapple with a dynamic landscape.

The ripples set by these stories suggest a stock well worth watching. Evolution tinged with privatization, spearheaded by strategic trades and directional leadership, could nudge FNMA towards robust realms not seen before.

In this context, Fannie Mae emerges from the conservative chrysalis, potentially positioning itself at the helm of an unfolding narrative that spans markets and reignites trader imaginations with exciting possibilities. As millionaire penny stock trader and teacher Tim Sykes says, “You must adapt to the market; the market will not adapt to you.” Both risk and potential fasten prospects tightly, and the story continues to unravel, keenly awaited by eager market participants.

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

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”