Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3459279 times)

orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13690 on: September 10, 2019, 09:41:28 AM »
Moelis has projection of 100B in captial with price before 10% appreciation at $11.73 @ 8.4 eps. That projects sweep ending in Q4 18 so will need to adjust for money swept of 3.2B+2.4B+/- 3.4B. So will need additional 5.9-9.3Billion. Just need to project for likely higher preferred capital conversion and could get pretty close to where things may end up. so $9-10 per share not withstanding any other "private capital". So a double from here?

I would be extremely careful when trying to apply the Moelis plan.

  • It includes all of 2021's earnings being retained towards the capital base. You will have to add that to the equity raise too.
  • Page 25 has the earnings projections, which exceed earnings from 2014-2018 by a decent amount. The administration's talk of reducing FnF's footprint directly counters this. I would expect FnF's earnings to go down post-conservatorship, not up.
  • It has the juniors converting at 1.75 to 1, when the market ratio is more than twice that. Why would they accept such a bad conversion ratio?
  • The SPO investors get less than half of the equity in return for $75B in capital. They are providing the lion's share of the capital and are in a position of strength. Are they really going to settle for that little, especially with footprint reduction looming?
  • I also wouldn't take the $100B ball that Mnuchin lobbed and take off with it just yet. Calabria will be setting the final capital requirements, and he pegged it at "years and years" of retained earnings. I don't think he meant 4 or 5, which is what $100B would represent.

I agree on the caution and overlooked the 2021 retained earnings as you point out. Im too lazy to run the numbers but with preferred ~ a double from here depending on class IMO it still doesn't look like common clears the hurdle vs preferred  based on my superficial assessment in addition to what you said.


orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13691 on: September 10, 2019, 09:43:36 AM »
Taking the last couple of days unless you think preferred gets less then 50%ish in a conversion it makes sense to keep adding or even lever up if you have the balls.  8)

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13692 on: September 10, 2019, 10:21:35 AM »
Taking the last couple of days unless you think preferred gets less then 50%ish in a conversion it makes sense to keep adding or even lever up if you have the balls.  8)

These things are still so insanely cheap.  Heck, some at 41% of par (FMCCL)!
Take 4 minutes and listen to it. "Stars" by Skillet: https://www.youtube.com/watch?v=TbLJyjfyACM

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13693 on: September 10, 2019, 10:30:47 AM »
Taking the last couple of days unless you think preferred gets less then 50%ish in a conversion it makes sense to keep adding or even lever up if you have the balls.  8)

These things are still so insanely cheap.  Heck, some at 41% of par (FMCCL)!

Are they liquid enough to buy though? Is that the ask?
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Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13694 on: September 10, 2019, 10:41:08 AM »
Taking the last couple of days unless you think preferred gets less then 50%ish in a conversion it makes sense to keep adding or even lever up if you have the balls.  8)

These things are still so insanely cheap.  Heck, some at 41% of par (FMCCL)!

Are they liquid enough to buy though? Is that the ask?

20.50/21.00 - highly illiquid
Take 4 minutes and listen to it. "Stars" by Skillet: https://www.youtube.com/watch?v=TbLJyjfyACM

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13695 on: September 10, 2019, 10:48:19 AM »
Taking the last couple of days unless you think preferred gets less then 50%ish in a conversion it makes sense to keep adding or even lever up if you have the balls.  8)

These things are still so insanely cheap.  Heck, some at 41% of par (FMCCL)!

Are they liquid enough to buy though? Is that the ask?

20.50/21.00 - highly illiquid

Tight spread, will take a look. Cheers.
[E]xpedience does not license omnipotence.

Not Investment Advice. Do Your Own Research.

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13696 on: September 10, 2019, 10:52:24 AM »
Tight spread, will take a look. Cheers.

Never much inventory on the ask though.  Took me a long time to build up a good sized position.

Most likely priced so cheap due to illiquidity... can't get out of them if you need to.  If in for the long-haul then they are a great bet.
« Last Edit: September 10, 2019, 10:56:04 AM by Luke 5:32 »
Take 4 minutes and listen to it. "Stars" by Skillet: https://www.youtube.com/watch?v=TbLJyjfyACM

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13697 on: September 10, 2019, 10:55:59 AM »
given the big collins APA win and Crapo's exhortation to mnuchin to start up administrative reform (and Kennedy's exhortation to calabria to "saddle up"), the last few days have been most excellent. 

muscleman

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13698 on: September 10, 2019, 11:16:48 AM »
given the big collins APA win and Crapo's exhortation to mnuchin to start up administrative reform (and Kennedy's exhortation to calabria to "saddle up"), the last few days have been most excellent.

Yeah I agree. However the news is not powerful enough to disrupt the TA patterns. I am turning bullish though and looking for an entry when TA sets up.

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&uact=8&ved=2ahUKEwja1IOV7sbkAhWqIjQIHc6kCEsQFjAEegQIABAG&url=https%3A%2F%2Fwww.cbsnews.com%2Fnews%2Fmike-pompeo-steven-mnuchin-speak-news-conference-live-stream-today-2019-09-10%2F&usg=AOvVaw2Pp2jJq1PaUeveneFNLoJt
I wonder if the rumors about Mnuchin and Pompeo resignation last month is real. It seems to me that all these rumors are.
I am muslceman. I have more muscle than brain!

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13699 on: September 10, 2019, 11:33:50 AM »
we can expect the NWS to be stopped (and no 2Q dividend distribution) and a commitment fee for the treasury line sometime before end of month.  I wouldn't be surprised if nothing much happens and trading prices trend downward in the interim, though I think stopping the NWS should be taken as a formal kickoff for admin reform and should start an uptrend in prices thereafter.