Bill Ackman: The turmoil in the cryptocurrency market is affecting the stock prices of the "two houses"

Famous hedge fund manager Bill Ackman warned that forced liquidations and margin calls in the cryptocurrency market are triggering sell-offs of Freddie Mac and Federal National Mortgage Association stocks.

On November 21, Bill Ackman stated on social media that he had previously underestimated the exposure of Freddie Mac and Federal National Mortgage Association to cryptocurrencies.

Ackman pointed out that the connection between Freddie Mac and Federal National Mortgage Association and cryptocurrencies is not directly reflected in their financial statements. This exposure is hidden within the shareholder base of the two companies, where some investors holding cryptocurrency assets also allocate stocks of these government-sponsored enterprises.

He believes that when the prices of cryptocurrencies like Bitcoin drop significantly, investors holding leveraged positions face forced liquidations and margin call requirements.

To meet liquidity needs, these investors are forced to sell other assets, and stocks of Freddie Mac and Federal National Mortgage Association become affected. This mechanism leads to a correlation between the stock prices of the two companies and the price of Bitcoin.

The founder of Pershing Square admitted that although his hedge fund does not hold Bitcoin, in the short term, they effectively hold "the stock market proxy for Bitcoin."

Ackman emphasized that in the short term, technical factors may overwhelm fundamentals, and Freddie Mac and Federal National Mortgage Association are typical examples of this phenomenon.

Freddie Mac's Financial Condition Mixed

As a government-sponsored financial services enterprise, Freddie Mac provides liquidity to the market by purchasing, securitizing, and guaranteeing single-family home mortgages, with most of its income derived from this.

Data shows that the company's financial health is mixed.

On one hand, its net profit margin reaches 46.89%, and its free cash flow yield is an astonishing 297.1%, with a free cash flow profit margin of 66.68%, demonstrating strong profitability and cash generation efficiency.

On the other hand, the company's financial strength rating is "poor," primarily due to its debt-to-equity ratio of 49.99, indicating a very high level of leverage. Meanwhile, its earnings per share is negative $0.02, and the revenue growth rate over the past three years is only 2.9%, showing modest growth.

Valuation metrics indicate that Freddie Mac has a market capitalization of approximately $5.35 billion, a price-to-sales ratio of 1.06, and a forward price-to-earnings ratio of 2.31. The technical indicator RSI-14 is at 44.07, within the neutral range. The company's beta coefficient is 2.24, indicating a high volatility characteristic relative to the market.

High Valuation and Potential Market Risks

From a valuation and risk perspective, investors also need to remain cautious.

Analysis indicates that Freddie Mac's valuation is at a "significantly overvalued" level. Although its forward price-to-earnings ratio of 2.31 is relatively low, the price-to-sales ratio of 1.06 is within the historical normal range, suggesting limited growth potential.

Additionally, the company faces multiple risks. Its Altman Z-Score is 0, which is an indicator of financial distress. As a financial institution, Freddie Mac is inherently exposed to risks from interest rate fluctuations and changes in regulatory policies It is worth noting that the stock has a Beta value of 2.24, indicating that its price volatility is significantly higher than the market average, classifying it as a high-risk asset. Analysts have given the stock a comprehensive recommendation rating of neutral