Fannie Mae - Stock Performance Analysis

Fannie Mae - Stock Performance Analysis

BUS 533

Introduction

For my stock analysis I have chosen the FannieMae Company's common stock traded on New York Stock Exchange (NYSE) and listed under a ticker symbol FNM.

Even though the Fannie Mae's common stock is also traded on the Pacific Exchange and the Chicago Stock Exchange, I will only be analyzing the stock performance data collected from the NYSE during the eight business weeks from October 2nd, 2006 through November 24th, 2006.

While analyzing the data summarized in the Table 1 further below we can make a conclusion that the Fannie Mae stock is a relatively stable stock and therefore could be a good, stable investment at this time. Looking at the numbers reflecting the daily performance of the stock (Open-Close and Day Hi-Low) we could see that the daily fluctuations of the stock were not high and the general trend of the Fannie Mae stock is moving up in the positive direction. Graphs 1 and 2 are reflecting the Open-Close and the Hi-Low performance of the stock for the 8-week time period.

There are always numerous factors that influence the stock market and a single stock performance. One notable event from the data below is the price jump on November 8th, 2006 - stock price went up and almost reached US $62 per share (!). This was widely interpreted to be in reaction to the Democratic win in Congress. With a Democrat-run Congress, most analysts say that a strong bill limiting Fannie Mae's (and its closest competitor Freddie Mac's) portfolio size is now almost certainly dead, whereas it had been thought of having a decent chance of passage in a Republican Congress. This is another proof of how any changes in the politics and the economy affect the stock market.

Talking about the relationships between the Fannie Mae and the NYSE one would definitely want to discuss the unusual situation of not having filed annual or quarterly financials with the SEC (the Securities and Exchange Commission) for 2 years now. I believe it's unique in the history of the NYSE. It all started in fall 2004 when OFHEO (Fannie Mae's and Freddie Mac's government regulator), and the later the SEC, determined that both companies used incorrect accounting for numerous transactions, beginning with 2001. The SEC required them to restate all financial statements from that period, using the correct accounting rules. It is not such an easy task to do taking into account that those companies have the most complex and highest volume of derivative financial transactions of any other companies in the world. Ones the financial reports from the years 2001 - 2004 are completed, re-audited and submitted to SEC and OFHEO (the Office of Federal Housing Enterprise Oversight) that has been promised to be done during the second part of this year, Fannie Mae will have to put a lot of efforts to do "catch-up" filings, i.e. for 2005 and 2006, which will probably take up much of the next year or maybe longer.

Table 1. Fannie Mae common stock performance data based on trading results from NYSE (8-week period)

Columns 2 3 4 5 6 7 8

Date Open Close Day High Day Low Volume Hi-Low Open-Close

10/2/2006 55.72 54.52 55.87 54.4 2,209,400.00 1.47 1.20

10/3/2006 54.66 55.73 56.15 54.66 3,795,800.00 1.49 -1.07

10/4/2006 55.75 57.13 57.13 55.6 4,600,800.00 1.53 -1.38

10/5/2006 57.13 57.42 57.51 56.82 2,646,000.00 0.69 -0.29

10/6/2006 57.3 57.63 57.68 57.03 2,421,300.00 0.65 -0.33

10/9/2006 57.64 57.92 58.16 57.47 2,010,300.00 0.69 -0.28

10/10/2006 57.75 57.25 58.17 57.18 2,461,200.00 0.99 0.50

10/11/2006 57.75 58.09 58.2 56.98 5,385,100.00 1.22 -0.34

10/12/2006 58.59 58.59 58.73 58.17 2,426,400.00 0.56 0.00

10/13/2006 58.6 58.24 58.84 57.75 2,124,800.00 1.09 0.36

10/16/2006 58.24 58.69 58.77 58.21 2,478,200.00 0.56 -0.45

10/17/2006 57.9 58.5 58.72 57.1 2,320,400.00 1.62 -0.60

10/18/2006 58.95 59.84 60.17 58.64 16,738,200.00 1.53 -0.89

10/19/2006 59.48 59 59.49 58.74 2,519,000.00 0.75 0.48

10/20/2006 59.01 58.92 59.01 57.98 2,460,300.00 1.03 0.09

10/23/2006 58.53 58.78 58.9 58.45 2,680,400.00 0.45 -0.25

10/24/2006 58.42 58.54 58.69 57.94 2,927,300.00 0.75 -0.12

10/25/2006 58.71 59.18 59.31 58.4 1,818,200.00 0.91 -0.47

10/26/2006 59.12 59.89 60 58.57 2,378,000.00 1.43 -0.77

10/27/2006 59.45 59.42 59.69 59.01 2,045,800.00 0.68 0.03

10/30/2006 59.39 59.57 59.81 59.18 1,760,400.00 0.63 -0.18

10/31/2006 59.6 59.26 59.99 59.1 15,482,800.00 0.89 0.34

11/1/2006 59.26 58.33 59.26 57.93 4,210,500.00 1.33 0.93

11/2/2006 58.33 58.42 58.5 57.86 3,359,500.00 0.64 -0.09

11/3/2006 58.82 58.3 58.97 58.1 1,326,600.00 0.87 0.52

11/6/2006 58.7 59.56 59.58 58.66 2,289,500.00 0.92 -0.86

11/7/2006 59.85 59.9 60.15 59.45 3,501,000.00 0.70 -0.05

11/8/2006 59.98 61.65 62.37 59.98 6,973,800.00 2.39 -1.67

11/9/2006 61.99 61.03 61.99 60.83 4,377,900.00 1.16 0.96

11/10/2006 61 60.38 61 60.15 3,278,100.00 0.85 0.62

11/13/2006 60.15 59.51 60.5 59.34 3,738,200.00 1.16 0.64

11/14/2006 59.52 59.2 59.8 58.66 4,987,600.00 1.14 0.32

11/15/2006 59.01 59.09 59.3 58.64 2,810,800.00 0.66 -0.08