Shares of Fannie Mae (OTC:FNMA) and Freddie Mac (OTC:FMCC) are among the most talked-about shares not listed on a major exchange. But don't let that be mistaken for lack of interest -- big investors are weighing in and being heard on the mortgage giants. But is it worth listening?

Bill Ackman
The activist investor behind Pershing Square is now one of the biggest investors in Fannie Mae and Freddie Mac, holding just under 10% of the common shares of each. On top of that, Ackman has taken out agreements with counterparties to effectively give him even more exposure to the value of Fannie and Freddie shares.

Although Ackman's Pershing Square took a hit last year when a case against the government to end the net worth sweep was thrown out, Ackman has not backed down and remains bullish on this investment. Not only is Ackman still bullish but he recently called the Fannie and Freddie investment the "best trade ... in capital markets."

No new word of additional Fannie or Freddie share accumulation has surfaced from Ackman but this is understandable given the current size of his investment in the government-sponsored enterprises.

In January, Ackman successfully pushed to have one of his cases voluntarily dismissed so that the ruling from the September Lamberth decision would not dispose of Pershing Square's claims as well. Nonetheless, he is still pressing forward with efforts to end the net worth sweep of Fannie and Freddie by challenging it in the courts.

Bruce Berkowitz
The man behind Fairholme Funds has been quite prominent in the Fannie Mae and Freddie Mac investment discussion. Like Ackman, Berkowitz is also suing the federal government to end the net worth sweep of the GSEs and has cases currently active in the courts.

But unlike Ackman, Berkowitz has primarily focused on the preferred shares of Fannie and Freddie, which currently comprise about 7.6% of Fairholme's investments. More recently, Berkowitz has begun adding common shares of the GSEs and added to his holdings again, as noted in Fairholme's annual report.

In the report, Fairholme added nearly 5 million GSE shares (3.1 million from Freddie Mac and 1.8 million from Fannie Mae). With the latest additions, the common shares account for just over 1% of Fairholme's portfolio.

According to Bloomberg, Berkowitz has remained bullish, saying on a recent conference call, "We've had our ups and downs, but we are making considerable progress in the court of federal claims." Berkowitz looks ready to continue the court battle, which is no surprise, given the potential upside he sees and the amount of money he has invested into the GSEs.

Richard Perry
Perry Capital was among the first of the hedge funds to push for an end to the net-worth sweep of Fannie Mae and Freddie Mac, and the effort continues today. After having its case dismissed in September, Perry Capital is appealing the ruling.

Compared to Ackman and Berkowitz, Richard Perry has been less vocal on the Fannie and Freddie situation recently, but the efforts to appeal the last ruling show he is still very much involved in the court battle.

Should you buy them?
Having big hedge fund investors on board is a positive for most investors, but one should still examine the underlying investment. As it currently stands, Fannie and Freddie are making billions of dollars each on an annual basis, but none of this is finding its way back to shareholders due to the net-worth sweep being conducted by the Treasury.

There have been various estimates of what Fannie and Freddie would be worth if shareholders prevail in their cases against the government. Assuming the 79.9% warrant stake is exercised, Ackman, in a colorfully titled presentation "It's Time to Get Off Our Fannie," has estimated shares will be worth $23 to $47 each outside of conservatorship. I have reviewed Ackman's calculations -- and I encourage potential investors to do so as well -- and I see them as reasonable and useful in establishing a range.

Of course, there are other risks to the companies. If the shareholder lawsuits fail, their profits will continue to flow to the Treasury, and shareholders will only receive something if Congress decides to give up this source of income. Fannie and Freddie are also subject to downturns in the housing market, as they are backing trillions of dollars in mortgages and have not been allowed to rebuild adequate capital due to the net-worth sweep.

Potential investors should also take into account the risk of a shakeup in the capital structure. Additional common shares may need to be sold to raise capital if the GSEs are released from conservatorship, or the senior preferred stake may end up being converted into common shares, as was done with the government-owned preferred stakes in American International Group and Citigroup.

Despite their recent share price increases, Fannie Mae and Freddie Mac remain high-risk, high-potential-return investments, and investors should only buy shares with money they can afford to lose. Overall, I am bullish on Fannie and Freddie for their upside potential but keep them in the high-risk part of my portfolio due to the wide range of possible outcomes.

What this means
Despite a setback last September, the biggest hedge fund players in the Fannie Mae and Freddie Mac cases are still bullish on their positions. This is demonstrated by the fact that their stakes were either maintained or increased as these investors put their money where their mouths are.

The court cases put forth by these investors are also continuing as the Lamberth decision is appealed and the case in the U.S. Court of Federal Claims under Judge Sweeney continues. Currently, investors should watch the progress of the Sweeney case where information will continue to be gathered as the government's request to put the case on hold was denied.

But what is also clear from fundamental analysis and the strategies of the hedge funds is that the Fannie and Freddie play is a long-term investment that will be decided through future court cases.