Dividend.com: Don't Feed On Fannie, Freddie

Don't Bottom-Fish for Fannie Mae and Freddie Mac

Fannie Mae (FNM Quote) and Freddie Mac (FRE Quote) are hot topics lately in many financial discussions. The infatuation with these two stocks reminds us of last summer when Countrywide Financial began dropping. Back then, many people in the real estate industry, constantly waiting for a buying opportunity and a quick bounce, asked us if $30 was the right level to buy Countrywide, now a subsidiary of Bank of America(BAC Quote). They then asked if $20 was the right level, then it was $15, then $10, until suddenly the subject never came up again.

This situation seems eerily similar to what has happened with Fannie Mae and Freddie Mac. Go back to our post on July 11 , and you'll see we felt no attraction to either of the names, even after the stocks rebounded shortly after their initial sizable drops. As ratings get slashed, and negativity toward the two companies builds, it seems inevitable the mortgage finance giants will require a lifeline from the government or shareholders, either of which may be tough to come by.

We feel it would be foolish to take a shot at the ultimate in bottom-fishing these days. The $5 stock "Mendoza" line (baseball fans know the term as batting averages that fall under .200) for mutual funds needs to be recaptured - and sustained - before there is any hope of a potential comeback for these two home lenders. As we say often, there are several other areas that offer better investment opportunities at this time.

Fannie Mae and Freddie Mac aren't recommended dividend stocks, with both holding a Dividend.com rating of 1.9 out of 5 stars.