The Decline of Fannie

I have to say that I’m amazed by the decline and fall of Fannie Mae (FNM). Not that the company doesn’t deserve it, but to anyone who know who remembers the esteem with which this stock was held, the recent fall has to be disheartening. In the last six weeks, the shares are down -41%.
Shares of Fannie Mae were a no brainer for years. From late 1981 to late 2001, the stock went from 50 cents a share (adjusted for a 12-for-1 split) to $80 a share. Throw in dividends and that’s about another 100% to your return. That’s a return to investors of over 30% a year for two decades!
Today the stock broke below $38 a share, a level it first hit 11 years ago. Fannie Mae was loved by everyone. Peter Lynch touted it in his books. It was politically popular. Who could be against homeownership? Unlike the tobacco stocks, which everyone hated.
Here’s perhaps the most amazing stat: Both Fannie Mae and Altria (MO) are projected to earn $4.68 a share next year. Yet, Altria is going for $73 a share, which is close to twice FNM’s price.

Posted by on November 16th, 2007 at 11:18 am


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