Oksenholt Capital Management, an investor in Fannie Mae and Freddie Mac's stock, is echoing earlier calls by billionaire Bill Ackman for the government-sponsored enterprises' shares to be moved back to a major exchange.
"In my view, the time has come for Fannie Mae and Freddie Mac to
The move could increase institutional investor participation in the now profitable mortgage investors that have been held in conservatorship since the Great Financial Crisis, but also would require them to meet more stringent listing requirements.
"Well-capitalized enterprises trading on a major exchange would improve transparency, attract long-term private capital, and further align the companies with the interests of homeowners, renters, investors and US taxpayers," Oksenholt said.
The size of the stake
Oksenholt Capital also revealed that it holds more than 1 million Fannie and Freddie shares. This includes 700,000 shares of Freddie's common stock and positions in other GSE securities.
(Ackman, who is the founder and CEO of
Oksenholt has sold some of its Fannie Mae shares but is holding other GSE securities.
"While we have taken profits in portions of our Fannie Mae common position, we remain bullish on both enterprises and their junior preferred securities," Oksenholt said. "At present, we believe Freddie Mac common stock offers the most compelling long-term risk-reward profile."
Wedbush, which has a relatively higher price target for Freddie than Fannie, recently announced that in light of a shift in the administration's focus and congressional opposition, an uplisting and other stock moves may be
The waiting game
Oksenholt also said he agrees with what Fannie and Freddie's oversight chief, Bill Pulte, said has been an administration strategy to wait to stage a new offering for the government-sponsored enterprise until there's more confidence they'll generate peak value.
"The decision during President Donald Trump's first administration not to pursue a forced sales of the enterprises preserved significant long-term value for US taxpayers," he said.
Shares of the enterprises have been trading lower after peaking in the low double digits last year. Fannie's stock was trading at $5.80 at the time of this writing late Monday afternoon. Freddie's shares were trading at $5.17 at press time.
Oksenholt described the shares as being in alignment with the firm's strategic investments designed to be held over time, but also noted that they are "complex and inherently speculative."
"Our GSE exposure represents only a small portion of our overall equities portfolio, but we believe the long-term opportunity remains compelling," he said.
The path Wedbush analysts consider Fannie and Freddie most likely to pursue is one where they work to retain earnings over the next seven to 10 years in order to build up capital levels to the point where they meet regulatory requirements.
"We appreciate the ongoing efforts of Fannie Mae and Freddie Mac leadership teams to strengthen capital positions, improve operations and enhance transparency," Oksenholt said.
