FNMA: Excellent financials - why can’t the stock pick up?

Fannie Mae has really strong financials - what's up with its stock price? If a company in a different sector would have those financials, the stock would be an amazing buy.

Comments (25)

 
Feb 12, 2021 - 4:23pm

Q4 2020 revenue: Beat 30%
Q3 2020 revenue: Beat 18%
Q2 2020: Beat 11%. Beat q1 too

Q4 net interest income of $7B increased from $6.6B in q3. Q4 net revenue of $7.2B up from $6.75B in q3. q4 single-family business net revenue of $6.2B increased from q3; net income of $4B rose 5% from the prior quarter. Single-family delinquency rates decreased to 2.8% as of Dec. 31, 2020 from 3% as of Sept 30 2020. Q4 multifamily business net revenue of $963M rose 19% Q/Q while net income $626M increased 36%. Multifamily delinquency rates decreased to 0.9 as of Dec. 31, 2020 from 1.1% as of Sept. 30, 2020. Net worth rises to $25.3B in Q4, up 22% from Q3; remaining amount of the U.S. Treasury's funding commitment to Fannie Mae is $113.9B their backing is nuts

 
Most Helpful
Feb 15, 2021 - 4:57pm

I take it you're just learning, a couple of quick things.

1. a revenue beat just means the CFO managed analyst expectations well, it doesn't mean actual growth. look at their revenue growth, it's been an anemic 1.2% for the past 5y

2. their balance sheet is not built for safety, though the trend is good (have been consistently building equity over recent years). that said, their cash flow statement looks awful

3. government involvement is a huge question mark. when the shareholder isn't the 1st in line, your stock will usually have a lid on its potential

I'm not saying the stock can't do well, I'm saying your perspective on its financials may be off. "beats" are not indicative of health, they're indicative of analysts' expectations, and IIRC, analysts are accurate less than 50% of the time so that in and of itself is not the best rationale for wanting to buy a stock.

the other question is what is the catalyst that makes FNMA outperform its peers over whatever timeframe you're investing for? is it a multiple re-rating, acquisition, end of conservatorship, what? companies don't have their shares skyrocket just because of a few analyst beats and 1.2% revenue growth, gotta be something else.

 
Feb 12, 2021 - 2:06pm

Give me the back of envelop nbs why you think so. What does it trade off of / what multiple is appropriate & why? How fast is it growing? Are there cyclical concerns? 

 
Feb 12, 2021 - 2:15pm

https://www.marketconsensus.com/articles/fannie-mae-stock-analysis-fnma…

"Based on our above analysis, we rate FNMA stock as a HOLD for now. However, several more quarters of sustained and robust growth in the U.S. Housing market, as well as continued strengthening of FNMA's credit profile may cause FNMA stock to rate as a BUY."

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

 
Feb 13, 2021 - 3:20pm

famejranc

i'm pretty sure it's something that has to do with FNMA being in government conservatorship so the earnings can't go back to the shareholders.

It has been a penny stock and in a conservatorship for over 10 years.  

 

http://www.series65examtutor.com
 
Funniest
Feb 15, 2021 - 7:52pm

Fannie Mae is kind of like that girl in middle school you saw poop her pants in 2008. Although she might be cute now, you will never get over seeing her covered in shit.

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Feb 17, 2021 - 9:22pm

hahahahaha 

 

-

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

 
Feb 17, 2021 - 9:32pm

I've only been around two people that really shit their pants and both were in college (military school). 

The first time, we (freshman in military school) were all in the church after a meeting/service waiting for the upperclassmen who were pounding on the door, making their presence known they were coming for us soon. Our time was up. One of my classmates shit his pants in that moment and he will always be remembered as the guy who shit his pants that year. No one will ever forget it. 

The other time I was a senior and told the freshman in my company before a PT session that we were going to run 'until you shit your pants'. I told them if anyone fell out of this run, their classmates would have to pay for it. So no one fell out. Then, this one kid couldn't run anymore and shit his pants running. He stopped and almost collapsed, but stayed conscious. I almost got in trouble for this. Someone called an ambulance and he went to the hospital. I gotta give him credit though, he ran until he shit his pants and we will all remember that day. 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

 
Feb 17, 2021 - 1:16pm

To add to what others have said, this is finance 101: the intrinsic value of your stock price is the present value of future cash flows. All Fannie Mae cash flows get swept into the U.S. Treasury, so investors have no right to cash flows; therefore, the stock is basically worthless. The only reason it isn't zero is because there is a chance investors could win a legal challenge to the conservatorship and then be entitled to a decade of prior cash flows. 

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