Investors who have owned stocks over the last year have generally experienced some decent gains. In fact, the SPDR S&P 500 SPY (NYSE:SPY) total return over the last 12 months is 15.3%. But there is no question some big-name stocks performed better than others along the way.
Fannie Mae's Bumpy Road: One company that has been a disastrous investment in the past year has been government-sponsored enterprise Federal National Mortgage Association (OTC:FNMA).
Fannie Mae and Freddie Mac have been under government conservatorship since they were bailed out during the housing market collapse back in 2008. Fannie and Freddie received $191 billion in bailouts following the crisis and have paid an estimated $292 billion in dividends to the Treasury in recent years as part of a government “net worth sweep” that Fannie and Freddie investors have challenged in court.
The government-sponsored enterprises’ share price took off following Donald Trump’s election back in November 2016 on hopes he would finally tackle housing finance reform. Unfortunately, the Trump administration wasn't the savior Fannie and Freddie had hoped it would be.
At the beginning of 2020, Fannie Mae shares were trading at $3.12. By the beginning of March of that year, the stock was down to $2.63 as news of the coronavirus spreading in China prompted concerns about a U.S. pandemic.
Fannie Mae ultimately bottomed at $1.26 during the pandemic-driven March sell-off. By the end of 2020, Fannie Mae shares were back above $2.30.
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Fannie Mae hit its 2021 high of around $2.50 ahead of a disastrous Supreme Court ruling for investors.
On June 23, 2021, the Supreme Court ruled the U.S. president has the authority to replace the head of the Federal Housing Finance Agency (FHFA). It also rejected a Fannie Mae and Freddie Mac shareholder lawsuit claiming the FHFA overreached its authority in handling the GSE's, particularly in implementing the net-worth sweep.
The news sent Fannie Mae shares tumbling below $1.25. The sell-off continued through October 2021 with the stock dropping all the way down to around 70 cents.
Fannie Mae shareholders got a glimmer of hope in November 2021 when Trump sent a letter to Sen. Rand Paul suggesting he would have removed FHFA Director Mel Watt and ordered the release of Fannie and Freddie from conservatorship at the beginning of his presidency if he had had the authority to do so at the time.
With legal avenues seemingly exhausted at this point, Fannie Mae shareholders may be rooting for Trump to run for president again in 2024. He is currently the leading candidate for the 2024 Republican nomination, according to online prediction market PredictIt.
Fannie Mae In 2022, Beyond: Trump optimism briefly sent Fanie Mae shares back over $1 in late 2021, but the stock has since drifted back down to 86 cents.
Unfortunately, Fannie Mae investors who bought one year ago and held on have generated a horrible return on their investment. In fact, $1,000 in Fannie Mae stock bought on Feb. 17, 2021, would be worth about $457 today.
Looking ahead, the one Wall Street analyst covering Fannie Mae is expecting limited gains over the next 12 months. The analyst has a $1 price target, suggesting 15.7% upside from current levels.
