Famed investor Michael Burry, best known for his prescient bet against the housing market portrayed in “The Big Short,” has revealed he holds “sizable positions” in mortgage finance giants Fannie Mae (OTC:FNMA) and Freddie Mac (OTC:FMCC).
Burry Outlines Bullish Case For Fannie And Freddie
According to a Reuters report, Burry anticipates the companies will see significant upside if they return to the public markets, declaring the formerly distressed entities “Toxic Twins No More” in a recent analysis.
Writing in his “Cassandra Unchained” newsletter, Burry outlined a bullish case for the government-sponsored enterprises (GSEs). He projects that an initial public offering (IPO) could price shares between 1 and 1.25 times book value.
Once listed, he expects the shares to trade at 1.5 to 2 times book value within one to two years. “Once each company is released from capital restraint by their IPOs, I expect growth to accelerate naturally,” Burry wrote.
Burry Pivots On GSEs From 2008
The investment marks a sharp pivot for Burry, who noted in his post that he had warned of the GSEs’ “foreboding history” and “fragility” as early as 2003.
He acknowledged their past failures, including the 2008 crisis when they “tempted fate and lost,” and a 1981 insolvency.
However, by labeling his new thesis “Toxic Twins No More,” Burry signals a belief that the entities have sufficiently rehabilitated to warrant aggressive investment.
Fannie And Freddie IPOs On The Card
Burry also speculated that Warren Buffett's Berkshire Hathaway Inc. (NYSE:BRK) (NYSE:BRK) could take a “substantial position” in the mortgage giants if they go public. Berkshire previously held a stake in Fannie Mae before the 2008 crash.
The timing aligns with reports that the Donald Trump administration may launch IPOs for the pair later this year. Fannie and Freddie currently guarantee roughly 62% of outstanding U.S. mortgages, underpinning the vast majority of the American housing market.
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