William Ackman, the Hedge Fund Titan, said that U.S. mortgage financing companies Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Federal Home Loan Mortgage Corp (OTCBB:FMCC) are good bets in the coming year. The two firms offer the most interesting risk-reward ratio in the capital markets right now. Ackman expressed his views at the Harbor Investment Conference in response to the investment questions related to the two mortgage financing companies.
The hedge fund
Pershing Square Capital Management, the hedge fund of Ackman was ranked as a best performing hedge fund in 2014. It posted a 40% return last year. It is not for the first time Ackman is betting on Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) or other mortgage companies. He first made a bet on the sector late 2013. Ackman’s hedge fund is worth $18 billion in present time.
The other news
In the other news, a measure of home-builder confidence declined in February, an indication that the housing industry may continue to face headwinds in 2015. The builder-confidence for new single-family homes dropped by two points to an adjusted level of 55 compared to January’s reading of 57. The economists expected index to rise to 58 in February.
The housing market
Home-builder sentiment rose last year and touched a peak of 59 in September. It was the highest level since 2005. However, the positive momentum has faltered over the past few months. The only positive factor is sentiment index has not fallen below the 50-point threshold. This month’s decline is due to high snow levels across the nation. Affordable home prices, low mortgage rates and solid job growth are the factors that will keep boosting housing market in 2015.
Adding to the volatility
The news will add up to the volatility in Federal National Mortgage’s share price in this week. Despite a drop in reading, it is important to mention that a reading above 50 indicates a majority of builders see market conditions as positive. In last trading session, Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) soared more than 20% to close at 3.31.