2013 Continues to Deliver Outrageous Returns for These Companies

There was good news this week for companies "Mae" or "Mac" in their titles -- as their stocks delivered an early Christmas gift to investors.

Fannie Mae (NASDAQOTCBB: FNMA  ) , Freddie Mac (NASDAQOTCBB: FMCC  ) , and Ellie Mae (NYSE: ELLI  ) have all watched their stocks rise by more than 7% since last Friday. This just marks one week of many this year where both government-sponsored entities (Fannie Mae and Freddie Mac) have had their stocks rise by more than 10% from Friday to Friday.

ELLI Chart

Ellie Mae
Ellie Mae provides mortgage software solutions to companies, and its software is used in 20% of all mortgage originations in the United States. In a report released on Wednesday, the company did note it saw an increase in refinancing in November, as rates dropped by a quarter of a percent. It also added that it saw loosening credit standards from banks in the mortgage process, but on that day its stock was actually down slightly.

There weren't any dramatic changes from Ellie Mae that would've sent the stock soaring on Monday (when it rose by almost 4.5%) but the company did have its analyst meeting last week, so perhaps someone poured through the materials and decided to buy more. It is also worth mentioning the company watched its P/E multiple plummet from 60 down to 50, so its movement could also be attributable to valuation.

Source: Flickr/401(k) 2013.

Fannie Mae and Freddie Mac
The two government-sponsored entities continued their astounding runs in 2013, as each has watched its stock rise by more than 10 times year to date. The news this week surrounding Fannie Mae and Freddie Mac was largely around the plan from the Federal Housing Finance Agency, or FHFA, to reduce the maximum loan size the two entities can buy from banks and the additional raise in its fees charged beginning next April.

Curiously, the intention behind the FHFA's move was made with "the goal of contracting the market presence of Fannie Mae and Freddie Mac gradually over time," and "invite private capital to reenter the market." That could in turn hurt the business of Fannie Mae and Freddie Mac, however some believe this may ultimately be a sign that the government would one day exit its conservatorship of the two companies.

The big news also came when the two entities announced they would be increasing the fees they charge to mortgage originators to buy loans by 10 basis points. Many suspect this move too is to give private capital further incentive into the mortgage guarantee market that Fannie and Freddie operate in. However that didn't deter investors from pouring into these stocks.

In all, these three companies had the biggest climbs in the financial sector this week, and the investors of both Fannie and Freddie are probably hoping the final full week of 2013 continues in the same way that many this year have, with the stocks on the rise.

Looking ahead
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (2) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 21, 2013, at 9:37 AM, DSTinRoof wrote:

    Dear Mötley Fool, I was just wondering out of the millions of stocks that trade why there are so many articles from so many writers on such a regular basis devoted to (or bashing) Fannie Mae and Freddie Mac, stocks obviously considered worthless by your company. One would think you would move on to cover stocks that would be worthy of your time to cover.

  • Report this Comment On December 21, 2013, at 1:02 PM, minmartar wrote:

    This is one of the business strategy to get more reader volume and this article likely aims for 2 different goals.

    1. Ellie Mae is one of Fool's stock picks. But potential subscribers will not read if it is about just Ellie Mae. But the whole world knows FNMA and FMAC. This way, they can get more impressions and sale leads to Fools' subscription service.

    2. Fools don't want to miss the boat. They are keeping an eye on this potential mammoth.

Add your comment.

DocumentId: 2773459, ~/Articles/ArticleHandler.aspx, 4/16/2014 3:32:34 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement