Penny stocks don’t always mean start-ups and in the case of FNMA stock & FMCC stock, the road ahead could be interesting to say the least.
Two of the most active penny stocks to watch this year, Fannie Mae (FNMA Stock Report) and Freddie Mac (FMCC Stock Report) may be positioned for a ride this month. As discussed by other contributors, 2 Penny Stocks To Watch In 2019 have been FNMA and FMCC and for good reason. The government has been discussing the best route possible to return these firms to the pre-bailout glory days. But hopefully this time around, the result won’t be the same.
But there are several pieces in motion on this chessboard right now. These two penny stocks could be the beneficiaries if the right moves are made. Last week, the federal court of appeals stood up to the government’s stance at making Fannie and Freddie send profits to the Treasury Department. It was then followed up with another event. This time, Treasury Secretary Steven Mnuchin made a statement on Fox Business.
That announcement made this week clued the public into the fact that Mnuchin may be “close to an agreement”. This agreement would effectively give Fannie Mae and Freddie Mac access to keep earnings for themselves. This would seem like a logical step in the direction to re-privatization these mortgage finance behemoths.
Penny Stocks To Buy Or Avoid
So, are FMCC stock and FNMA stock penny stocks to buy or should you avoid them like the plague? In my opinion, there still needs to be some diligence had right now and don’t throw caution to the wind either.
Penny stocks are risky assets in general but when you see the herd mentality begin to push the groundswell, stay nimble. What I mean here is that hype can fuel momentum even more than the initial catalyst(s).
What Mnuchin stated was definitely a big gust of positive news for hedge funds looking to see some appreciation in these penny stocks. The step should prove to be critical if these two companies want to be rid of government oversight & direct control. This has been a long time coming should it formalize.
Fannie Mae and Freddie Mac have been under “government rule” since the 2008 financial crisis. But it hasn’t been for random reasons. If you’re just getting familiar with these two penny stocks to watch, pay attention. A brief history lesson on why these two companies went under government control in the first place is because of a little thing called the housing bubble.
“During the financial crisis, these organizations took on too much risk. Though it has nothing to do with them being penny stocks per se, it does put them into a risk category. That’s based on the previous history. The government seized control of the companies in 2008 and agreed to put in enough to support roughly $5 TRILLION in debt securities issued by the companies.”J. Samuel, PennyStocks.com
Can These Penny Stocks Continue Higher?
Additionally, Fannie and Freddie have restrictions from holding more than $3 billion in capital each. Should another housing crash happen, there’s no way either could weather that storm. So returning earnings or most of the earnings to FNMA and FMCC could be another positive of nixing government control. Given this information, it’s no wonder why both of these penny stocks took off again this week.
These two penny stocks have been beleaguered for a while and it reached a head at the tail end of 2018. Ever since the start of 2019, FNMA and FMCC have been speculatively building steam. On Monday, that speculative momentum pushed to new highs. Shares of Fannie Mae stock reached highs of $3.96 and Freddie Mac stock reached $3.74.
Year to date, shares of the housing penny stocks are up generously. Since January 2, Fannie Mae stock is up by as much as 268%; Freddie Mac stock is up by as much as 243%. Neither stock has seen levels like these since late 2016 to early 2017. Before that, neither traded close to this $3+ mark since 2014. With the moves being made in favor of privatizing the two companies, could this signal “next steps”?
How Will These Penny Stocks Stack Up After The Dust Settles?
For nearly a decade, the anxiety of investors has festered with the government control issue at the center of contention. The court decision paired with Mnuchin’s interview means that the day of reckoning could be approaching.
But keep in mind that there are other things at work. These “other things” could put a few potential bumps in the road. The Treasury secretary will testify before the Senate Banking Committee this week on the administration’s plan. FHFA Director Mark Calabria and Housing and Urban Development Secretary Ben Carson will also join Mnuchin.
The likely outcome could be a hard push against the motion from Democratic lawmakers. The major concern here is that the administration’s proposals will focus more on appealing to hedge funds. This would be in light of actually helping consumers obtain loans, especially for low-income purchasers.
Penny Stocks To Watch Ahead Of 2020 Election
Furthermore, you can’t forget that there’s an election year coming. So, take note if and/or how “feet drag to prolong a decision,” could hold some importance. The Treasury Department’s proposal still had holes in it. So, suggested changes may not come about until after the 2020 presidential election.
Should a Democrat beat the current incumbent, this whole “to do” may be scrapped entirely. Even though things are exciting now, make sure to keep tabs on the underlying risks and learn how to manage should those materialize.
Also Read More 5 Penny Stocks To Buy For Under $1.50?
At the end of the day, if an overhaul does happen, Congress will lead negotiations. All these points mentioned would be up for discussion. Some of the more conservative ideas would most likely get taken out of the running. So, keep in mind that there are many unknowns, still. The fact of the matter is that these two penny stocks will remain under close scrutiny for the foreseeable future; this week being the next potential milestone to keep an eye on.