Fannie Mae put on an elaborate show for investors last week, and all indications are that it was a smash hit.
The company holds a daylong meeting for securities analysts and money managers every two years. By an accident of timing, last week's renewal came when Fannie's investors needed some encouragement. The stock has been languishing closer to its 12-month low than to its high recently.
Pam Bledsoe, a fixed-income analyst with USAA Investment Management Co., San Antonio, Tex., said: "The big theme of the meeting was Fannie's ability to sustain double-digit earnings growth, and they appeared to make a good case."
After the meeting, two analysts upgraded their recommendation on the shares to "buy" from "hold," and one analyst initiated coverage with a buy.
"The stock has done a little better since the meeting than before, at a time when other financial service companies have been under pressure," said Gary Gordon, an analyst with PaineWebber Inc., New York.
Following the Wednesday meeting, Fannie Mae's shares traded as high as $79, up $2.24 from the close the preceding week
Mr. Gordon has had a long-standing "buy" recommendation on the shares. He said the meeting bolstered his positive opinions about the company.
|Upbeat' Meeting
"It was a very upbeat meeting," he said. "Their confidence that they can continue to grown earnings at double digits was very positive. They've even considered what might happen with interest rates rising 300 basis points."
He added that he had also gained reassurance that the government was unlikely to make any changes that would affect its earning power.
Chris Davis, a New York-based portfolio manager for Venture Advisers of Santa Fe, N.M., also said he was impressed by the presentation. "We've been calling Fannie the Merck of the 1990s," he said.
"The market still hasn't gotten convinced. But what a great company it is; it was obvious from the meeting that they just ooze class."
Mr. Davis said he had been adding shares to the portfolio he manages for Venture, a mutual fund company.
Stability Seen
Jonathan Gray, an analyst with Sanford C. Berstein & Co., New York, said he was also impressed by the Washington presentation. He has been recommending Fannie Mae for an extended period, and said the message of stability and management continuity was reassuring. "You go to these meetings over a period of time and you see the same management," he said.
Mr. Gray has a more conservative estimate of origination volume over the next several years, but does not believe the difference is as significant for Fannie's outlook as it is for mortgage banking stocks.
