Fannie and Freddie are zeros, analyst says

Stocks fall after rating and target price cut.

By Kim Peterson Oct 19, 2009 2:48PM

If you own shares of Fannie Mae (FNM) or Freddie Mac (FRE), you're sitting on a whole lot of nothing, according to analysts at Keefe, Bruyette & Woods.


The analysts cut the price target on both stocks to zero and downgraded them to underperform.


In order for these mortgage giants to survive, the analysts said, they need to be recapitalized from the banking industry. But even if that happens, their common and preferred stocks will be worthless.

The government has funneled $98 billion in capital into Fannie and Freddie, according to MarketWatch.


Both stocks dropped after the analyst note came out. Fannie Mae shares were down 21.9% to $1.14 and Freddie shares were down 21.5% to $1.35.


Fannie and Freddie buy mortgages from lenders and bundle them into securities, according to MarketWatch. They also guarantee payment, and accounted for 68% of all mortgage originations in 2009.


The KBW analysts suggested the government separate out the Bad Fannie and Bad Freddie from the good. That way, the government can cut its losses and create an exit strategy from the industry.
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

113
113 rated 1
268
268 rated 2
422
422 rated 3
632
632 rated 4
512
512 rated 5
518
518 rated 6
682
682 rated 7
523
523 rated 8
343
343 rated 9
124
124 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
COPCONOCOPHILLIPS9
TAT&T Inc9
DVNDEVON ENERGY CORPORATION9
EOGEOG RESOURCES Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.