mymeohmoneyblog

If you're considering taking a chance on FRE or FNM, consider the preferreds. This isn't a suggestion; just an idea. The FNM preferreds as listed on msn have all already rebounded nicely from being sold off OVER 79% several days ago. Here's the list and their closing prices a couple days ago when i first took an interest in them, since which they've all moved up several double-digits:
fnm-s 2.91
fnm-m 3.35
fnm-h 3.45
fnm-q 2.04
fnm-f 3.02
fnm-p 1.75
fnm-i 3.4
fnm-t 2.6
fnm-g 3.25
fnm-l 3.35

A few of these i liked more than others based on devaluations, dividend rates, and the trading volume.

It looked to me then like most of these had sold off more than 79% and were preparing for a rebound, which has occured recently. I'm not sure if they've recovered that statistical margin yet that would equal a pre-conservatorship price appx. 5x higher (just do the math) but i think their closer now.
I'd spent an hour or two digging and backreading through a deluge of commentary about the bailout and wasnt really able to find the information i was looking for (arguably poor search methodology on my part). Obviously these preferreds were included in the devaluation, and of course there dividends were cut indefinitely, but i was trying to find out when the new federal super/senior preferreds get listed, if at all, and more of the specifics on the fed infusion. Also i couldn't find share counts or market caps for each of these stocks on MSN, so i couldn't really get a good sense of the future risk.
Maybe these still have a day or two left of short-term recovery on them, but longer term, if you've considered FNM or FRE, you might want to consider these instead.
By buying these instead you're most likely aligning yourself more with special interests who may be able to tug some sleeves than with the commons. Also, if you're going to consier the commons, why not go with the preferreds which at least have a chance of reinstating dividends in the distant future. I suppose precedence would dictate that any future (and likely) fed infusions would equally devalue the commons and preferreds again, but at some point the devalution would become farcical, if it has'nt already, meaning there is slightly more reason for the feds to wipeout the commons but preserve the subordinate preferreds to save some sense of decency.

P.S. For all of the preferreds for which i looked at the yearly charts it appeared as though they had just been created this year, so in theory that increases the likelyhood, imo., that the feds would let these recent institutional buyers salvage something, long-term. but that's an overstatement of course, considering they've just been demolished. Also, i believe the fed comments on the bailout suggested that the treasury would try to work with any large institutions who've suffered losses as a result of the devaluation, and perhaps one way of doing so is to implicitly assure these recently created subordinates survive.

Comments: View Comments |  Saturday September 13, 2008  |  Stocks: fre fnm,