Predicting where a price will rise or fall too for this stock is going to be pretty hard.
It is extremely undervalued from a standard earnings per share metric when you get rid of the profit sweep.
The results of the numerous lawsuits could easily cause share price spikes.
Freddie Mac using their Deferred Tax Asset could cause a similar spike to share price like Fannie Mae's DTA did.
A major announcement of another big name investor could cause a spike in price.
On the flip side:
Negative statements from members of Congress and the Whitehouse would probably cause the price the stock to drop again.
A negative result from the lawsuits against the Government.
or just a period where no positive news occurs about this stock could cause price to drop
Valuation Viewpoint:
We all know Fannie and Freddie have 3 times the assets under management and the equivalent of 5 times the shares when you take into account the governments ownership position compared to 2008-9 time frame.
Fannie was an 60 to 80 dollar stock prior to all this mess.
So if 3 times the assets equates to 180-240 share before you take into account government shares. And divide by 5 to take into account the government shares in a conversion... or 35-48 dollar per share.
If you want to add in inflation rate per year If you want to add in the increase in Guarantee fees If you want to add in rising home prices. If you want to add in future rising interest rates.
The price per share after conservatorship gets even better.
I would say making a prediction on the stock price is bit too soon at this point given all the unknowns and potential variables out there.
Disclosure: I am LONG. I believe the GSEs will get released from conservatorship.
Paulson: "Fannie and Freddie was just supposed to be a "TIME OUT" on CNBC Fannie and Freddie own more than 90% of mortgages and they are bigger and stronger than ever! WOW! The writing is on the wall and this opportunity should not be overlooked. Paulson said Conservatorship was supposed to be a timeout.
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