What the Pros Are Buying, Part 3

Who would have thought that after nearly five years, that now may be an excellent time to take a closer look at the common shares of Freddie Mac (FMCC) and Fannie Mae (FNMA)? Lately both of these companies have been in the headlines thanks to two very prominent investors. First in line is Bruce Berkowitz of Fairholme Capital. Berkowitz holds over $3 billion in the preferred stock of both of these companies, so he's not yet ready to bet on the equity, at least not until recently. Earlier this month Berkowitz announced a bold attempt to buy both Fannie and Freddie from the government for approximately $52 billion. To be specific, Berkowitz wants to only buy the insurance operations of both entities.

Recently, however, activist investor Bill Ackman has jumped on board and announced that his firm Pershing Square owns just under 10% of the common stock of both Fannie and Freddie. If you haven't noticed, Fannie and Freddie are gushing in profits. So much so, that the U.S. government's $187 billion capital infusion has almost been nearly repaid in the form of dividends from Fannie and Freddie. On top of that, Uncle Sam still holds equity in both firms making it highly likely that when the U.S. exits the positions, the taxpayer will have reaped a very attractive return on investment....408 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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