why are there only a spattering of Institutional Investors?
The answer is pretty simple.
Many funds are not able to invest in FNMA or FMCC because the stock has not achieved a certain level in the market place. This is also why certain stocks crash hard once they cross a level of support that forces major institutions to dump a stock arbitrarily because it does not meet the fund's requirements for Capitalization, ROE, Price, etc.
Most of us have seen this played out over and over. Companies like Bank of America lost huge support because their dividend was cut and their stock price fell below a certain point where major mutual funds were force to drop their holdings in the stock because it didn't meet the quality standards of their investment portfolios.
This is a big reason why investing in Mutual funds can only return average to mediocre results over time because they cut their losses and cause the stock to plummet further....and won't invest in a company until it demonstrates a prescribed level of performance.
I call this group think gone from bad to worse. Because often times the fund manager may want to invest in a company their hands are tied by rules that prevent them from taking advantage of an extremely good deal.
Why does this matter? Because right now only a hand full of institutional investors are taking a bet on FNMA and FMCC. And those Institutions know that this is a good deal. This is good news if you are an investor who can see the opportunity. But this also lends to the reasons the shorts are so active. The big money that is investing right now wants more stock at cheap prices. So the same time they are buying they are also shorting the stock and accumulating on the dips. Also, individual investors who are long in this stock and see the opportunity are more than happy to flip stock and accumulate their positions. Because they know eventually the word will get out and these stocks will be set free from conservatorship.
Once this stock is release from Conservatorship and probably relisted on one of the exchanges the same funds that got rid of this stock will buy in hard because they know it is a good investment and it will meet the minimum requirements for their funds to buy in.
The catalyst everyone is waiting for is the release from conservatorship. We all know the companies are making a profit.
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