The Morning Brief: Mnuchin Boosts Fannie and Freddie

April 24, 2017   Stephen Taub


The mortgage giants’ shares rose on Friday after the Treasury Secretary said overhauling them is a top priority for President Trump.

Shares of Fannie Mae jumped about 2.5 percent, while Freddie Mac shares rose 1.3 percent, on Friday after Treasury Secretary Steven Mnuchin said overhauling the mortgage-finance system is "very important" to President Donald Trump’s administration, according to Yahoo. He also said various administration officials and congressional leaders are trying to figure out what to do with the two mortgage-finance companies.

"We are committed to working with the House and the Senate on having a reform package that makes sure that we promote necessary liquidity in the housing markets," Mnuchin said during a briefing with reporters, according to the report. However, he stressed the issue is not a major priority for the first half of the year.

Hedge funds like Bill Ackman’s Pershing Square Capital Management and John Paulson’s Paulson & Co. have been pushing the government to privatize the two mortgage giants. Keep in mind that before the election, Mnuchin and Trump held investments in Paulson’s hedge funds, while right after the election Ackman publicly declared himself bullish on Trump.

The government bailed out Fannie and Freddie during the financial crisis and put them in a conservatorship. Since then they have been sending the government a big chunk of their profits. Several weeks after the election, the stocks surged after then-Treasury secretary nominee Mnuchin suggested this arrangement could change as early as 2017, making it clear in a published interview that removing Fannie and Freddie from the government’s grip was one of his major priorities.

Despite Friday’s move, shares of Fannie and Freddie are down about 36 percent this year alone.

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UBS raised its price target on Buffalo Wild Wings from $170 to $185, one day after activist hedge fund firm Marcato Capital Management called on the restaurant company’s chief executive officer, Sally Smith, to resign, sending the stock up 6 percent.

In a note to clients, the investment bank still raised some concerns about the company, including same-store sales growth and what it calls "challenged industry sales trends." However, it says planned sales and cost savings initiatives are likely to drive earnings improvement through 2017 and 2018, "and potential strategic catalysts exist over the coming months," an apparent nod to the activist. Despite the UBS move, shares of Buffalo Wild Wings Friday slipped 1.22 percent, to close at $161.75.

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Shares of hedge fund favorite Visa were flat on its highest volume in 2.5 months after several investment banks raised their price targets on the credit card processing company. The moves were in response to the company reporting that earnings came in higher than expectations in the most recent quarter.

For example, Credit Suisse lifted the target from $100 to $105 and raised its estimates, citing the earnings beat. It also pointed out that in the recent fiscal second quarter, Visa returned to shareholders more than 100 percent of its net income, buying back $1.7 billion in shares and issuing $400 million in dividends. The board also authorized another $5 billion share repurchase. UBS raised its target from $97 to $102, citing solid net revenue growth benefitting from lower incentives. At year-end, the stock was the eighth-most popular stock among hedge funds, with at least 121 investors. In addition, 33 of them included the stock among their top-ten holdings.

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Two Sigma Ventures, the venture arm of hedge fund firm Two Sigma, participated in the $3.5 million seed financing of Boundless, which aims to help people navigate the U.S. immigration process. According to geekwire.com, the company’s chief executive, Xiao Wang, was formerly at Amazon.com, where he helped build and launch Amazon Go. In addition, five of the company’s six employees personally went through the U.S. immigration process.

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Caxton Associates sold nearly 400,000 shares of International Seaways, reducing its stake to 7.12 percent. The company, which has a market cap of $559 million, owns a fleet of vessels to transport crude oil and petroleum products.


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