Activist investor Bill Ackman, the CEO of Pershing Square Capital Management, is bullish Fannie Mae.
Ackman gave a 110-slide presentation at the 19th annual Sohn Conference yesterday, detailing why he's bullish on the government-controlled mortgage giant.
According to Ackman, the potential return is tenfold.
Fannie's stock is trading just above $4 per share. Ackman sees the stock price ranging from $23 to $47 in the future.
Fannie and Freddie needed massive bailouts amid the financial crisis but have in recent quarters become wildly profitable again. And a number of hedge funders have been bullish for a while.
Ackman's Pershing Square owns 115,569,796 shares of Fannie and 63,505,693 shares of Freddie Mac.
As Ackman puts it, this investment is like "owning a royalty on the housing-finance market."
Pershing Square proposes a plan to reform the GSEs, rather than liquidate them.
"The best way to maintain widespread availability and affordability of the 30-year, fixed-rate, prepayable mortgage and provide substantial profit to the taxpayer is to reform the GSEs," according to the presentation.
Ackman's recommendations include increasing capital requirements for GSEs, eliminating the fixed-income arbitrage business, subjecting GSEs to increased regulatory oversight, and developing appropriate compensation and government policies.
We've included a copy of the presentation:
See the rest of the story at Business Insider