After a spectacular 1998, shares of Freddie Mac and Fannie Mae have been in a rut-or as analysts put it, a "trading range"-this year.

Last year Fannie Mae's stock rose 29.6% and Freddie's 53%. But Fannie was down 3.55% and Freddie 1.45% through midday Friday, according to Salomon Smith Barney. Shares of government-sponsored enterprises, which also include Sallie Mae, have slipped 5.1% on average-while the Dow Jones industrial average soared 17.9%.

This week investors will get a chance to take a closer look at the situation when Fannie Mae's top executives make themselves available for questions on strategy and business lines at its investor conference in Washington. The conference is held every two years.

Analysts will look for clues on how the enterprises are likely to respond to a laundry list of negative factors that include:

Narrowing spreads on new mortgages.

The possibility that loan growth will decline from last year's robust levels.

Slipping guarantee and technology fee income resulting from competition between Fannie and Freddie.

Political risk.

Sanford C. Bernstein analyst Jonathan E. Gray has rated both stocks "outperform," though he acknowledged that they present "a mixed picture" for investors.

The slippage has left the stocks 20% to 25% below Mr. Gray's target prices of $88 for Fannie Mae and $75 for Freddie Mac.

Mr. Gray said that he sees good prospects for loan growth, and that more government regulation is not an immediate danger. He said he expects a 15% decrease in total originations and an increase in the share of adjustable- rate mortgages "as the mix of originations shifts from refis to purchase activity."

But he noted a "sharp increase in agency market share" in late 1998 and early 1999, and estimated that Fannie and Freddie's share of originations will rise to 51%, from 47% last year.

"It is likely that EPS growth will decelerate within two years, to perhaps 10% to 11% for Fannie Mae and 13% for Freddie Mac," Mr. Gray said. Those levels are likely to be "significantly better than growth for the S&P," he added.

Mr. Gray predicted Freddie will have average earnings per share growth of 16% over the next five years, including 29% growth this year. Yet Freddie is now valued at only 70% of the S&P 500 average price-earnings ratio, he said.

Mr. Gray's forecast for Fannie is for average earnings per share growth of 12% over the next five years, including 14% growth this year. Fannie is now valued at 65% of the market price-earnings ratio.

Salomon Smith Barney analyst Thomas O'Donnell shares Mr. Gray's view that the two companies are undervalued. His 12-month target prices are $90 for Fannie $75 for Freddie.

Mr. O'Donnell attributed the downturn this year to profit taking and a steepening of the yield curve, which resulted in fewer mortgage originations. The rising political risk faced by the two companies, as Congress contemplates capital standards for the two companies, and opponents organize to limit their activities, have also affected their shares, he said.

CIBC Oppenheimer analyst Steven Eisman downgraded Fannie and Freddie's stocks to "hold" in early April, in response to the political risk. Lenders, mortgage insurers, and other competitors who hope to confine Fannie and Freddie to the narrow role of buying mortgages in the secondary market have formed the Competitive Consumer Lending Coalition to lobby more effectively for their cause.

Of the three GSEs, Sallie Mae has had the worst performance this year. The stock is down 10.29%, after a 20.1% rise last year, Mr. O'Donnell said.

"All is well with the company," he said, but the government is a "wild card" in the equation. Mr. O'Donnell has a "speculative buy" on Sallie.

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