This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Fannie (FNMA) and Freddie (FMCC) Tip Into the Red

Stocks in this article: FNMA FMCC

NEW YORK (TheStreet) -- Fannie Mae (FNMA) and Freddie Mac (FMCC) were in the red on Monday, seeing losses of 2.2% and 2.4%, respectively.

Earlier in the day, Freddie Mac sold $2.25 billion of reference bills. These included $250 million of one-month bills, due Jan. 6, $1 billion of three-month bills, due March 10, and $1 billion of six-month bills, due June 9. While demand for the one-month bills was unchanged, Freddie reported demand for three-month bills was stronger and demand for six-month bills was weaker than a week earlier.

Separately, last week, the Federal Housing Finance Agency (FHHA) announced it had finalized a major overhaul of mortgage insurance policy requirements, the first in several years. Combined, the housing financers Freddie and Fannie provide more than $5.5 trillion in funding for U.S. mortgage markets and institutions.

The policy changes relate to loss mitigation, processing of claims, assurance of coverage and enhanced communication between mortgage insurers, servicers and Fannie and Freddie.

"Updating the mortgage insurance master policy requirements is a significant accomplishment for Fannie Mae and Freddie Mac," said FHFA Acting Director Ed DeMarco in a statement. "The new standards update and clarify the responsibilities of insurers, originators and servicers and they enhance the insurance protection provided to Fannie Mae and Freddie Mac, which ultimately benefits taxpayers."

TheStreet Ratings team rates Fannie Mae as a Sell with a ratings score of D+. The team has this to say about their recommendation:

"We rate Fannie Mae (FNMA) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has decreased to $6,716 million or 17.53% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market, Fannie Mae's return on equity significantly trails that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 100.3%. Since the same quarter one year prior, revenues slightly dropped by 5.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for Fannie Mae is currently very high, coming in at 108.97%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 28.71% trails the industry average.
  • This stock has increased by 922.08% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in FNMA do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs