Fannie Mae, Freddie Mac Shares Rise As Fincl Sector RalliesFont size: A | A | A1:48 PM ET 8/24/09 | Dow Jones
By Greg Morcroft
Shares of Freddie Mac and Fannie Mae rose sharply Monday, headlining another rally in financial shares but puzzling at least one analyst, who says the firms are insolvent and maintains a zero price target on their shares.
Fannie Mae (FNM) shares rose 45% Monday, and Freddie Mac (FRE) rose almost 30%.
"When buying Freddie and Fannie, people are speculating the government will leave the companies in their current form long enough so they can earn their way out of these losses," Morningstar analyst Matthew Warren said on Monday. "I wouldn't view this activity in Freddie and Fannie as investing. I would call it high-risk speculation."
Both Fannie and Freddie shares have been rising sharply in recent weeks as buyers are betting that the government won't close or dismantle them. The rationale, Warren said, is similar to what has happened with stocks like Citigroup Inc. (C) and American International Group Inc. (AIG), which have also had to be rescued by the government.
https://www.etrade.wallst.com/v1/stocks/news/search_results.asp?docKey=1-BT20090824004426-7LKJ9EG2V8HQUEB2DL5S2HQKJL&DMSourceID=DJNF&Source=Dow Jones&docDate=2009-08-24 17:48:00&headline=%20Fannie%20Mae%2C%20Freddie%20Mac%20Shares%20Rise%20As%20Fincl%20Sector%20Rallies&refSymbols=undefined
Monday, August 24, 2009
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