Bill Ackman: Turmoil in the cryptocurrency market is affecting the stock prices of Fannie Mae and Freddie Mac.
Renowned hedge fund manager Bill Ackman has warned that forced liquidations and margin calls in the cryptocurrency market are triggering sell-offs in Fannie Mae and Freddie Mac stocks.
On November 21, Bill Ackman stated on social media that he had previously underestimated the exposure of Fannie Mae and Freddie Mac to cryptocurrencies.
Ackman pointed out that the connection between Fannie Mae, Freddie Mac, and cryptocurrencies does not appear directly in their financial statements. This exposure is hidden within the shareholder base of both companies; some investors holding cryptocurrency assets also allocate their portfolios to these government-sponsored enterprises’ stocks.
He believes that when the prices of cryptocurrencies like Bitcoin drop sharply, investors holding leveraged positions face forced liquidations and margin calls.
To meet liquidity needs, these investors are forced to sell other assets, with Fannie Mae and Freddie Mac stocks being affected. This mechanism results in a correlation between the share prices of these two companies and the price of Bitcoin.
The Pershing Square founder admitted that, although his hedge fund does not hold Bitcoin, in the short term they have essentially held a "stock market proxy" for Bitcoin.
Ackman emphasized that in the short term, technical factors may outweigh fundamentals, with Fannie Mae and Freddie Mac as typical cases of this phenomenon.
Mixed Financial Health for Freddie Mac
As a government-sponsored financial services enterprise, Freddie Mac provides market liquidity by purchasing, securitizing, and guaranteeing single-family residential mortgages, which is the main source of its income.
Data shows the company's financial health is mixed.
On the one hand, its net profit margin reaches a high 46.89%, free cash flow yield an astonishing 297.1%, and free cash flow margin is 66.68%, reflecting strong profitability and cash generation efficiency.
On the other hand, the company’s financial strength rating is “poor,” mainly due to its debt-to-equity ratio as high as 49.99, showing an extremely high level of leverage. At the same time, its earnings per share stand at negative $0.02, and its revenue growth rate over the past three years is only 2.9%, showing moderate growth.
Valuation metrics indicate Freddie Mac has a market cap of about $5.35 billion, a price-to-sales ratio of 1.06, and a forward P/E ratio of 2.31. Technical indicator RSI-14 stands at 44.07, within the neutral range. The company’s beta coefficient is 2.24, indicating a high level of volatility relative to the market.
High Valuation and Potential Market Risk
From a valuation and risk perspective, investors also need to remain cautious.
Analysis indicates that Freddie Mac's valuation is at a "significantly overvalued" level. Although its forward P/E of 2.31 is relatively low, the price-to-sales ratio of 1.06 is within the historical norm, suggesting limited growth potential.
Additionally, the company faces multiple risks. Its Altman Z-Score is 0, a warning sign of financial distress. As a financial institution, Freddie Mac is inherently exposed to interest rate volatility and changes in regulatory policy.
Notably, the stock’s beta value of 2.24 means its price volatility is much higher than the market average, making it a high-risk asset. Analysts give the stock an overall neutral rating.
Risk Warning and DisclaimerThe market involves risk, and investors need to exercise caution. This article does not constitute personal investment advice and has not considered individual users’ particular investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific situations. Any investment made based on the above is at your own risk.