In regulatory filings on Friday, Pershing Square Capital Management said that it has a 9.98% stake in Fannie Mae and a 9.77% stake in Freddie Mac.
On Friday, Fannie Mae's shares surged 9% to $3.34 in afternoon trading. Freddie Mac's shares jumped 7.2% to $3.11.
Ackman's company invests in and bets against a wide range of businesses. In August, Ackman resigned from J.C. Penney's board and sold Pershing's entire 18% stake in the department store operator as part of a deal to resolve a public dispute between himself and the Plano, Tex.-based company.
In October, Ackman reduced his short position, a bet that the stock price will fall, against nutritional supplement maker Herbalife. Ackman had taken massive short positions on the company's stock, meaning his fund would make money if the shares decline
Earlier in November, Fannie Mae and Freddie Mac reported strong third-quarter earnings on the back of a recovering housing market. The government rescued Fannie and Freddie at the height of the financial crisis in September 2008, when both veered toward collapse under the weight of losses on risky mortgages. Together, the companies received taxpayer aid totaling $187 billion.
The gradual rebound of the housing market has made Fannie and Freddie profitable again. Their repayments of the government loans have helped make this year's federal budget deficit the smallest in five years.
The two companies don't directly make loans to borrowers. They buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. That helps make loans available.
Ackman's disclosure came two days after another investment firm, Fairholme Capital Management, offered to buy Fannie and Freddie's core businesses from the government in a $52 billion deal.
Miami-based Fairholme, led by Bruce Berkowitz! , made the proposal to the Federal Housing Finance Agency, which oversees Fannie and Freddie.
Fairholme said it would lead a group of investors to buy the mortgage-bond guarantee businesses of the two companies. The firm said that would be sufficient to back about $1 trillion in new mortgages.
The Obama administration is seeking to wind down Fannie and Freddie though it's unclear whether the Fairholme proposal would fit with the administration's plan. Government officials have said previously that a small group of investment firms taking on such a large risk of mortgage defaults would open the possibility of the government having to bail out the firms if they failed.
The goal of the Obama plan is to replace Fannie and Freddie with a system that would put the private sector, not the government, primarily at risk for the loans. That would spread the risk over numerous companies. The government would still be involved, both in oversight and as a last-resort loan guarantor. The White House also wants a guarantee that private lenders will make sure homeowners have access to 30-year fixed mortgages.
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WireImage/Getty Images From a poorly planned food drive to "mislabeled" bibles to a run on recliners, here's a rundown of the week's best and worst moves in the business world. La-Z-Boy (LZB) -- Winner It's not easy to get pumped about a maker of reclining furniture, but that's just what happened this week when La-Z-Boy posted better than expected quarterly results. Sales rose 14 percent for the quarter, and the furniture maker's profit of $0.31 a share was well ahead of what Wall Street was forecasting. La-Z-Boy also sweetened its own story by boosting its quarterly dividend by 50 percent. Something tells me that bigger dividends sound better to folks than the comfy chair. Walmart (WMT) -- Loser A Walmart store in Ohio made headlines for all the wrong reasons when it set up a food drive to benefit its own impoverished employees. Walmart is already taking plenty of heat for its low wages, even though it's not materially different than what many retailers pay. It never gets the accolades for making budgets last longer by offering low prices. However, this time the knocks are warranted. Setting up tables in the employees' area for sales associates and cashiers to donate food items for their poor coworkers was never going to end well. Walmart initially played it up as a positive, suggesting that it was collecting for Walmart employees whose spouses are out of work. However, the more straightforward interpretation is that Walmart doesn't pay a living wage sufficient to provide for a family, and that's the one that went viral. SodaStream (SODA) -- Winner Making soda at home just got easier with SodaStream introducing SodaStream Caps. Simply pressing a SodaStream Caps capsule down into a fizzed up SodaStream bottle provides enough syrup for the entire liter. It's a slightly more convenient process than having to pour out the syrup from a bottle's measuring cap. SodaStream Caps are now being sold exclusively through Bed Bath & Beyond (BBBY), though other retailers will begin stocking the portion packs starting next year. Starting at $5 for a eight capsule cola or diet cola pack, it's not cheaper than the existing bottles, but it should be enough to win over those who haven't been as neat with their syrup pours in the past. Costco (COST) -- Loser You rarely see this warehouse club giant mess up, but it did this week. A pastor visiting a Costco in California was surprised to see a bible labeled as "fiction" in the store's book department. His post on Twitter went viral. Was this an agnostic employee with a mean streak and a label gun? No. Costco laid the blame on a distributor for making the mistake on a small number of bibles. It naturally relabeled the bibles, but it was still embarrassing for a company that has typically earned nothing but praise for its high wages and its decision to remain closed on Thanksgiving. Green Mountain Coffee Roasters (GMCR) -- Winner The death of Green Mountain's K-Cups at the hands of rival private-label coffee pods appears to have been greatly exaggerated. Shares of the company behind the Keurig single-serve coffee brewers rose after posting blowout quarterly results. Green Mountain saw revenue as well as sales of its K-Cups and brewers all climb at double-digit percentage rates. Green Mountain did offer a gloomy outlook for its holiday quarter, but investors brushed that aside after the company initiated a quarterly dividend and authorized an additional $1 billion share buyback plan. Green Mountain will still need to tackle its slowdown in the current quarter, but at least it's returning money to its shareholders to reward their patience.
$7.6 billion IT services firm Computer Sciences (CSC) has been doing some consolidating of its own for the last few months. Shares have been stuck trading between resistance at $54 a share and support down at $50 a share since mid-July. But despite its sideways bent, there's a trade to be made in CSC right now. Right now, CSC is forming a rectangle pattern, a consolidation setup that's formed by a pair of horizontal resistance and support level at those $54 and $50 price levels. The rectangle pattern gets its name because it basically "boxes in" shares between those two levels. The signal to watch is the break outside of that box. Support at $50 has some extra strength because it's a level that was previously a ceiling for shares back in March and again in May. That's not uncommon for a round number like $50, but it makes an upside breakout a lot more likely from here. Momentum, measured by 14-day RSI, has moved into neutral mode in the last week, clearing the way for upside without the risk of shares becoming overbought. If shares of CSC can hold a bid above $54, it's time to buy.
It doesn't get much more simple than the setup in shares of Guidewire Software (GWRE). You don't have to be an expert technical analyst to figure out what's going on in this stock. All it takes is a quick look at the chart. Guidewire is currently trending higher in a well-defined price channel, a setup that gives us a high probability price range for GWRE's shares to trade within. Now, with shares sitting at trendline support, we're coming on a timely buying opportunity; buying at support has proven prescient each of the last six times GWRE has tested the support level that it established in March. But it's still critical to wait for the bounce in shares. Buying off a support bounce makes sense for two big reasons: it's the spot where shares have the furthest to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before you know you're wrong). Remember, all trend lines do eventually break, but by actually waiting for the bounce to happen first, you're ensuring the Guidewire can actually still catch a bid along that line.
Alamy Best Buy (BBY) is getting unduly cocky in its latest holiday ad. Comic actor Will Arnett reads a revised version of "'Twas the Night Before Christmas," featuring a father who knocks off his holiday shopping list with a single trip to the consumer electronics superstore. Arnett goes on to call Best Buy "the great showroom floor." The ad closes with "Your Ultimate Holiday Showroom" as graphic text. Best Buy is clearly trying to take back the word "showroom" at a time when "showrooming" has come to mean consumers kicking the tires of products at local retailers only to order them for less online. That's a real problem for bricks-and-mortar businesses, but nonetheless, Best Buy is making its actual showroom the centerpiece of this holiday season's marketing campaign. That's gutsy. It's also an ill-advised strategy. The Fatal Flaw in Best Buy's Turnaround Story Best Buy has certainly won back investors. The stock has nearly quadrupled since bottoming out last December. There's also probably nobody as confident of Best Buy CEO Hubert Joly. "A year ago people said that showrooming would kill Best Buy" he told The Wall Street Journal in an interview this week. "I think that Best Buy has killed showrooming." That's a brazen claim; Best Buy's fundamentals don't match its stock price. Same-store sales -- the key metric in the retail industry that measures how much the average established store is raking in relative to a year earlier -- have been consistently negative for the past three years. The store-level situation is also actually worse than even the reported numbers suggest. Best Buy is one of the growing number of retailers that include online sales in their same-store sales calculations. Dividing the growing number of BestBuy.com sales into the chain's store count artificially inflates the amount of merchandise that physical stores claim to be selling. No offense, Best Buy, but until you legitimately grow sales at the individual store level, showboating about your showroom is premature. You Can't Spell Holiday without H-O-L-D Between the buoyant stock price, its CEO's bravado, and the perpetually smug Arnett as a pitchman, one might expect Best Buy was headed for a blowout holiday shopping season. Well, analysts don't seem to think so. Analysts see Best Buy's sales sliding nearly 11 percent during the company's fiscal fourth quarter. Amazon.com (AMZN) on the other hand -- the company that supposedly Best Buy is winning the showrooming battle against -- is expected to soar 22 percent during retail's hottest quarter. Wall Street does see Best Buy's profitability continuing to improve, but that's a testament to Joly's skill at cutting costs and improving profit margins. He has certainly done a commendable job on that front, and that's ultimately the reason why the stock has been such a big winner in 2013. However, when it comes to the store's actual popularity, Best Buy is nowhere close to being the retailer that it used to be. The Long Way Down Best Buy has had more than a few bad breaks along the way. The economic slowdown didn't help. The widespread decision among consumers' to take a pass on high-priced 3-D TVs took a bite out of the chain's big-ticket sales. However, the digital revolution has stung Best Buy in more ways than merely the showrooming trend. It's true that more and more customers are armed with smartphones these days. Why buy a stereo receiver or a computer monitor at Best Buy when a few seconds on a smartphone can locate the same product being sold for a lot less online? Best Buy really can't compete on price with Amazon and other Web-based retailers that don't have to pay up for a retail presence. Worse, the smartphone and tablet revolutions hurt Best Buy by pulling the rug out from under its sales of vast quantities of physical media and software -- CDs, DVDs, and video games -- the products that Best Buy once used to lure customers in more often. You may only need a new dishwasher once a decade, but there are new music, movie, and game releases every week. Now that media has gone digital and downloadable, Best Buy has to find new ways to encourage shoppers to trek out to its stores. So far, it hasn't done that. If we go by the same-store sales figures and analyst holiday forecasts, Best Buy's brash advertising strategy amounts to little more than whistling past the graveyard -- and there's a plot waiting for it.