Fannie Mae (FNM)

EngelvonChemie (62.52) Submitted: 10/14/06 5:23 PM : Start Price: $54.91 FNM Score: -64.12

Unquestionably, Fannie Mae has been through the ringer: earnings restatements, CEO resignation, governmental inquiries. These less than trivial concerns have driven the stock price low. However, as is often the case with companies subject to increased scrutiny and accompanying overactive speculation, the long-term picture may not be as bad as it seems. Ultimately, FNM sits on a huge pool of assets--there's a lot of value to be had there.
Fannie is in the business of making home ownership accessible to the lower-income masses. In the long term, I see growth in housing to be strong if dotted with occasional bouts of weakness. The best consensus is that the feds will permit Fannie to operate with tighter restrictions on the management of their mortgage backed securities. Further, the new CEO Mudd has stated his preparedness to do the tough work required to right his ship. I think his forthrightness will be well-received as the harbinger of new era of transparency for Fannie.

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