Critical Contrast: Fannie Mae (OTC:FNMA) & Freddie Mac (OTC:FMCC)

Freddie Mac (OTC:FMCC) and Fannie Mae (OTC:FNMA) are both mid-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, institutional ownership, earnings, risk, analyst recommendations, dividends and valuation.

Profitability

This table compares Freddie Mac and Fannie Mae’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Freddie Mac	9.74%	-33.18%	0.35%
Fannie Mae	11.22%	-30.10%	0.39%

Risk & Volatility

Freddie Mac has a beta of 2.09, indicating that its stock price is 109% more volatile than the S&P 500. Comparatively, Fannie Mae has a beta of 1.98, indicating that its stock price is 98% more volatile than the S&P 500.

Institutional & Insider Ownership

0.0% of Fannie Mae shares are held by institutional investors. 0.1% of Freddie Mac shares are held by insiders. Comparatively, 1.0% of Fannie Mae shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Freddie Mac and Fannie Mae”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Freddie Mac	$108.05 billion	0.04	$10.54 billion	($0.06)	-102.90
Fannie Mae	$139.99 billion	0.06	$17.41 billion	N/A	N/A

Fannie Mae has higher revenue and earnings than Freddie Mac.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Freddie Mac and Fannie Mae, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Freddie Mac	0	0	0	0	0.00
Fannie Mae	0	1	0	0	2.00

Fannie Mae has a consensus price target of $3.00, suggesting a potential downside of 55.22%. Given Fannie Mae’s stronger consensus rating and higher possible upside, analysts clearly believe Fannie Mae is more favorable than Freddie Mac.

Summary

Fannie Mae beats Freddie Mac on 10 of the 11 factors compared between the two stocks.

About Freddie Mac

Federal Home Loan Mortgage Corporation operates in the secondary mortgage market in the United States. The company purchases single-family and multifamily residential mortgage loans originated by lenders, as well as invests in mortgage loans and mortgage-related securities. It operates through two segments, Single-family and Multifamily. The Single-family segment purchases, securitizes, and guarantees single-family loans; and manages single-family mortgage credit risk, as well as manages mortgage-related investments portfolio, single-family securitization activities, and treasury functions. This segment serves mortgage banking companies, commercial banks, regional banks, community banks, credit unions, housing finance agencies, savings institutions, and non-depository financial institutions. The Multifamily segment engages in the purchase, sale, securitization, and guarantee of multifamily loans and securities through the issuance of multifamily K and SB certificates; issuing and guarantying other securitization products; issuing other credit risk transfer products; and provision of other mortgage-related guarantees. It serves banks and other depository institutions, insurance companies, money managers, central banks, pension funds, state and local governments, real estate investment trusts, brokers and dealers, and a range of lenders. The company was founded in 1970 and is headquartered in McLean, Virginia.

About Fannie Mae

Federal National Mortgage Association provides a source of financing for mortgages in the United States. It securitizes mortgage loans originated by lenders into Fannie Mae mortgage-backed securities (Fannie Mae MBS). The company operates through two segments, Single-Family and Multifamily. The Single-Family segment securitizes and purchases single-family fixed-rate or adjustable-rate, first-lien mortgage loans, or mortgage-related securities backed by these loans; and loans that are insured by Federal Housing Administration, loans guaranteed by the Department of Veterans Affairs and Rural Development Housing and Community Facilities Program of the U.S. Department of Agriculture, manufactured housing mortgage loans, and other mortgage-related securities. This segment also provides single-family mortgage servicing, as well as credit risk and loss management services. The Multifamily segment securitizes multifamily mortgage loans into Fannie Mae MBS; purchases multifamily mortgage loans; and provides credit enhancement for bonds issued by state and local housing finance authorities to finance multifamily housing. This segment also issues structured MBS backed by Fannie Mae multifamily MBS; buys and sells multifamily agency mortgage-backed securities; invests in low-income housing tax credit (LIHTC) multifamily projects; and offers delegated underwriting and servicing, as well as multifamily mortgage, and credit risk and loss management services. The company serves mortgage banking companies, savings and loan associations, savings banks, commercial banks, credit unions, community banks, insurance companies, private mortgage originators, and state and local housing finance agencies. Federal National Mortgage Association was founded in 1938 and is headquartered in Washington, the District of Columbia.