Is Fannie Mae a Buy? | Ask a Fool

TL;DR

Fanny May common shares are not a good investment due to the ongoing conservatorship, lack of termination date, and government control over profits.

Transcript

hey fools Matt copen heffer here with our ask a fool Series today we have a question from our Facebook page the question from Marty Ford is is Fanny May ticker symbol FN ma a goodbye Marty I'm glad you asked this has been uh let's say an exciting time for Fanny May's uh Equity shares and the Equity shareholders now let's be clear right off the top ... Read More

Key Insights

• 📞 Fanny May common shares are separate from preferred shares that have been receiving attention.
• 🙈 The conservatorship of Fanny May gives the government control over its actions and profits, ignoring the interests of common shareholders.
• 🧑‍🤝‍🧑 There is no specified termination date for the conservatorship, making the future of Fanny May uncertain.
• 🔬 Investing in Fanny May common shares is a speculative venture, as it requires multiple hurdles to be overcome for profitable returns.
• 👍 Private companies with proven profitability and ability to distribute profits to shareholders are more favorable than Fanny May in its current state.
• 💨 Legislation has been proposed to wind down Fanny May and Freddie Mac, adding further uncertainty to the investment.
• 🔬 The outcome of investing in Fanny May common shares is highly speculative and not recommended without careful consideration.

Questions & Answers

Q: What is the difference between Fanny May's common shares and preferred shares?

The common shares of Fanny May, ticker symbol FNMA, are different from the preferred shares that have been in the news. Common shares trade over the counter, while preferred shares have attracted attention from hedge funds.

Q: What does it mean for Fanny May to be under conservatorship?

Being under conservatorship means that the Federal Housing Finance Agency has taken control of Fanny May since September 6th, 2008. The conservator solely focuses on doing what the government wants and directing profits to the government, ignoring the interests of shareholders and debt holders.

Q: Is there a set date for the conservatorship to end?

No, there is no specified termination date for the conservatorship. It is uncertain whether Fanny May will continue to exist following the conservatorship or what changes may occur to its business structure.

Q: What are the challenges for common shareholders in investing in Fanny May?

Investing in Fanny May's common shares is a significant speculation. Common shareholders need Fanny May to be continuously profitable, repay the government bailout, avoid winding down, and eventually be reprivatized. All these conditions must align for common shareholders to make a profit.

Summary & Key Takeaways

• Fanny May common shares, ticker symbol FNMA, are different from preferred shares that have been mentioned in the news.

• Fanny May is currently under conservatorship by the Federal Housing Finance Agency, with no specified termination date.

• Under conservatorship, the government controls Fanny May's actions and profits, disregarding the interests of common shareholders and debt holders.