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TMFEditorsDesk (< 20)

Fannie Mae is up 200% in ONE MONTH?

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August 25, 2009 – Comments (5) | RELATED TICKERS: FNMA , FMCC , ETFC

Shares of Fannie Mae are up 12% as I write this. If you look at its historical  prices, the company has soared 83% over the past week, not including today's price jump. If you go back even further..the stock has rocketed almost 200% in one month. Huh?? What in the world is going on?!

As Fool writer Matt Koppenheffer points out today:

It's a mystery why shares of Fannie Mae (NYSE: FNM) and Freddie Mac(NYSE: FRE) spiked on Monday. The two were up 42% and 19%, respectively, on impressively large volume.

What gives? The financial positions of both companies are disasters, and both are drowning in government loans. In the most recent quarter, Fannie racked up a monstrous $15 billion loss, thanks to $18 billion in credit loss provisions.

Some market watchers have suggested that the big gains and sizable volume were driven by retail investors trading through sites like E*TRADE (Nasdaq: ETFC). Could the swarming individual investors see something that the institutional big shots missed?

Let's see if we can dig in a little.

On August 6th, shares of Fannie closed at $0.79. Then Fannie reported earnings after market close on the 6th. Interestingly, the next day, it's share price closed lower at $0.66, presumably based on the earnings report. BUT ever since then, it has been going up..up..and away.  

What's also interesting..today's volume is almost 8xs it's average volume (over the past 3 months.) If you pull up the historical prices of Fannie (here), look at the volume column. Clearly there's a spike in volume leading up to the earnings. But if you look back before August 4th, the volume is much, much, much lower than today. Volume seemed to range anywhere from 5 million shares to the mid-teens, with higher-volume days sprinkled in. That's probably to be expected with volatile penny stocks.

But recently, there hasn't really been any news on Fannie Mae. So why the massive spike? Why the 42% jump yesterday on volume of over 800 million shares? It feels like there's a LOT of speculation and day trading going on. 

What do you think? Maybe it's short covering, as Fool writer Morgan Housel pointed out examples of this earlier in August. Or maybe it has to do with interest rates stabilizing? Can you add some logic to this story? Chime in with your comments below.  

- Katrina (TMFToast), owns no shares.

5 Comments – Post Your Own

#1) On August 25, 2009 at 2:27 PM, leohaas (31.60) wrote:

"It feels like there's a LOT of speculation and day trading going on. "

There you have it! I am one of those speculators (sitting on a 100+% gain in FNM). Maybe it is time to sell?

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#2) On August 25, 2009 at 2:34 PM, ozzfan1317 (79.25) wrote:

Yeah with Fannie and Freddie and Aig I suggest taking your big gains soon and running those companies are a mess.

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#3) On August 25, 2009 at 3:52 PM, Broken196 (< 20) wrote:

Take your gains and laugh all the way to the bank. Shares of FNM and FRE are worthless.

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#4) On August 26, 2009 at 6:55 AM, TMFMarlowe (< 20) wrote:

Per NYSE.com (via Karl Denninger's blog, always a stimulating read), C, FNM, BAC, and FRE accounted for over a third of yesterday's total NYSE volume. Just those 4 stocks. Something really funky is going on. 

 

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#5) On August 26, 2009 at 10:45 AM, adamny (< 20) wrote:

I bought into (50,000 shares) FNM and FRE six months ago when the stock was at about 0.80/share. I got my bailout!! Who's the fool?

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