Pershing Square Capital Management: “FMCC Remains a Valuable Perpetual Option”

Pershing Square Capital Management, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. An annual portfolio net return of 26.9% was recorded by the fund for the whole year of 2021, versus the S&P 500 Index, the FTSE 100, and MSCI World Index that delivered a 28.7%, 17.4%, and 22.3% return respectively for the same period. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

Pershing Square Capital Management, in its Q4 2021 investor letter, mentioned Federal Home Loan Mortgage Corporation (NYSE: FMCC) and discussed its stance on the firm. Federal Home Loan Mortgage Corporation is a Virginia-based mortgage loan company with a $540.2 million market capitalization. FMCC delivered a 0.12% return since the beginning of the year, while its 12-month returns are down by -53.83%. The stock closed at $0.83 per share on February 19, 2022.

Here is what Pershing Square Capital Management has to say about Federal Home Loan Mortgage Corporation in its Q4 2021 investor letter:

“Despite an adverse Supreme Court ruling in June, we believe Fannie and Freddie remain valuable perpetual options.

Supreme Court largely sided with the government against shareholders.

-Found the Third Amendment to the PSPAs(1) to be authorized under the HERA statute.
-Declined to intervene to second-guess FHFA’s exercise of its discretion.
-Found unconstitutional HERA’s provision that the FHFA director may be removed only for cause.
-Sent case back to Fifth Circuit for further proceedings and potential damages.

We remain confident in the long-term value of Fannie and Freddie.

-Ongoing proceedings in the Court of Federal Claims, where denial of the government’s motion to dismiss is on appeal.
-Both entities continue to build capital through retained earnings from the current base of $67 billion.
-We believe re-privatization is an eventuality regardless of court outcomes.

FNMA and FMCC share prices declined 66% and 64%, respectively, in 2021 and both increased 5% year-to-date in 2022.”

Photo by Scott Graham on Unsplash

Our calculations show that Federal Home Loan Mortgage Corporation (NYSE: FMCC) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. Federal Home Loan Mortgage Corporation (NYSE: FMCC) delivered a -10.65% return in the past 3 months. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.

Disclosure: None. This article is originally published at Insider Monkey.