Ackman assumes Fannie and Freddie will eventually trade at 14 to 16 times earnings, an assumption Rafferty's Bove calls "aggressive." Bove assumes a multiple of 10 to 12 times earnings based on where the largest U.S. banks currently trade, though he says "you could argue me down to eight to 10 and I wouldn't have a good defense."

Ackman also implies the fees charged by Fannie and Freddie to guarantee mortgages could continue to rise as they did under Fannie and Freddie's previous regulator, Federal Housing Finance Authority Director Ed DeMarco.

But the current director, Mel Watt, suspended those increases shortly after being sworn in at the start of the year while the FHFA studies the issue. Rising fees means fewer mortgages, and many policymakers would like to see mortgages become more affordable, not less.

Still, the biggest assumption in Ackman's model is that the government, or the courts, fully restore the rights of shareholders. While plaintiffs such as Perry Capital and Fairholme Funds have the best legal team money can buy, their victory is by no means assured.

That is why Maglan Capital, a hedge fund which, like Ackman, is invested in Fannie and Freddie common shares, is unlikely to wait to see their rights fully restored before selling shares, according to Maglan President David Tawil.

"When we play into these legal and regulatory driven investments, we know that the downside really could be zero," says Tawil, who is a former bankruptcy and restructuring attorney.

Ackman has had enough success with certain investments that he can throw out big numbers at investor conferences without being laughed off the stage. There is General Growth Properties  (GGP), for example, shares of increased about 10 fold between the time recommended them at the Ira Sohn conference in June 2009 and the first quarter of the year, when Ackman existed the position.

On the other hand, Ackman argued in May 2012 that J.C. Penney  (JCP) could hit between $191-$315 per share. Instead, the retailer's shares have fallen by more than 50% and closed Monday at about $9.36.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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