Billionaire hedge fund manager Bill Ackman has reignited interest in two government-sponsored enterprises (GSEs): Fannie Mae (FNMA) and Freddie Mac (FMCC). The two companies have seen remarkable market performance with his bold claim that these mortgage giants have “large asymmetric upside.” His recent social media post on X caused both stocks to jump above 50%.
These gains come as big changes are happening in the mortgage market, along with growing interest in President-elect Donald Trump’s second term. Many analysts believe Trump could speed up the privatization of these companies.
On Jan. 3, 2025, the U.S. Treasury Department and Federal Housing Finance Agency (FHFA) unveiled a roadmap that outlined how privatization could work.
Ackman predicts that Fannie Mae and Freddie Mac stocks could reach approximately $34 per share by their anticipated IPOs in late 2026. This outlook comes as mortgage rates hover around 6.93%, presenting challenges for housing affordability and financing. Meanwhile, the Federal Reserve cut interest rates three times in 2024, lowering the federal funds rate to 4.25%-4.5% for 2025.
Let’s examine FNMA and FMCC more closely to determine whether following legendary investor Bill Ackman’s bold bet is worth it.
Fannie Mae
Fannie Mae (FNMA), created in 1938, plays a key role in the U.S. housing market by helping keep money flowing for mortgage loans. Instead of offering loans directly, the company buys them from lenders, bundles them into mortgage-backed securities (MBS), and sells them to investors around the world.
The stock has been on an incredible upward trend, jumping 51.83% in just the last five trading days and an eye-popping 290% over the past year.
This surge has pushed Fannie Mae’s market value to $28.58 billion. Its price-sales ratio is 0.99x, which is much lower than industry average and could mean the stock is undervalued. FNMA shares have been climbing since the U.S. Treasury and FHFA announced plans for its potential release from federal conservatorship.
Fannie Mae has also been busy with initiatives to expand affordable housing and promote inclusivity. It approved a program to support Native American lending and made updates to its Expanded Housing Choice initiative to help underserved markets.
Additionally, its 2025 Connecticut Avenue Securities Issuance Calendar, projecting $4 billion in CAS volume, highlights its effort to increase transparency and attract institutional investors.
Financially, Fannie Mae reported $4 billion in net income for the third quarter 2024, though this was down $440 million from Q2 due to lower fair value gains and reduced credit loss benefits. Its net worth hit $90.5 billion as of Sept. 30, 2024. During the quarter, it provided $106 billion in liquidity, financing 383,000 homes — 231,000 of which were single-family purchase loans (half for first-time buyers).
Multifamily housing also got a boost with 103,000 units financed, most of which were affordable for lower-income households. Revenue for the current quarter is estimated at $7.3 billion.
Despite these positives, analysts remain cautious about FNMA. The stock has a “Moderate Sell” rating. The mean price target of $1.75 signals significant downside from current levels, raising questions about whether its recent rally can be sustained.
Freddie Mac
Freddie Mac (FMCC), founded in 1970 as the Federal Home Loan Mortgage Corporation, plays a key role in the U.S. housing market by working in the secondary mortgage space. It buys mortgage loans from smaller banks and thrift institutions, bundles them into securities, and sells them to investors.
The stock has had a bullish run, jumping 51% in the past five trading days and an astonishing 520% over the past year.
Freddie Mac has a market value of $15.91 billion and a price-sales ratio of 0.81x, which is much lower than the industry average of 2.91x. This low valuation could mean the stock is undervalued, especially given Bill Ackman’s bullish view on its “large asymmetric upside.”
Freddie Mac’s financials are solid, with third-quarter 2024 net income reaching $3.1 billion — a 16% increase compared to the same period last year. Revenues climbed to $5.8 billion, up 3%, driven by a 5% rise in net interest income due to lower debt-related expenses and continued growth in its mortgage portfolio, which now stands at $3.5 trillion.
The company’s net worth has risen to $56 billion, supported by its strong operational performance and expanding portfolio. Revenue estimates for the current quarter are set at $5.02 billion.
The company has also made some notable moves recently that could support future growth. James Whitlinger was appointed CFO, bringing over three decades of financial expertise, while Jane E. Prokop joined the Board of Directors with a strong background in fintech and financial services.
Freddie Mac has also introduced new initiatives like CUSIP registration for ML-Deal offerings to improve market liquidity and partnered with FHLB Des Moines on the HeritageOne mortgage program to expand affordable housing options for Native American communities.
Still, analysts remain cautious about FMCC despite its strong performance. The general consensus is a “Moderate Sell,” with a mean price target of $3 representing potential downside from current levels.
Conclusion
Should you follow Bill Ackman into FNMA and FMCC? The stocks show potential, especially with their attractive valuations and strategic expansion into underserved markets. However, analyst skepticism and current market prices well above target levels suggest caution. For risk-tolerant investors betting on privatization under a potential Trump administration, these stocks might offer the “asymmetric upside” Ackman sees. For others, waiting for more regulatory clarity might be prudent before taking a position.
