Wall Street's Top Investors, Like Bill Ackman and Michael Burry, Are Betting on 2 Stocks That President Donald Trump Could Help Turn Into Multibaggers

Bill Ackman and Michael Burry have publicly touted large positions in Fannie Mae and Freddie Mac, arguing the Trump administration could push a return to private markets and potentially unlock multibagger upside; however, the path is highly political and regulatory. The firms were bailed out during the financial crisis (Treasury injected roughly $187 billion and received about $190 billion in senior preferred stock and warrants, while the government extracted over $300 billion under a ‘‘net worth sweep’’), Fannie generated at least $17 billion in profits in both 2023 and 2024 and holds roughly $105 billion of shareholder equity but still faces a reported ~$44 billion capital shortfall that the administration may try to bridge with an IPO (reported around $30 billion); any exit faces dilution from government stakes, legal questions about unwinding ownership, and the risk of mortgage rates rising 0.5–1% if implied government backing is removed. Analysts note large upside scenarios (Ackman estimates combined value near $400 billion; Burry expects 1.5–2x book value post-IPO) but stress substantial political/regulatory risk—junior preferred shares are lower-risk/lower-upside than common equity, and the real window for change may be limited to the coming years under the current administration.

Analysis

Bill Ackman and Michael Burry have taken public, high‑conviction positions in Fannie Mae (FNMA) and Freddie Mac (FMCC), arguing that a Trump administration push to exit conservatorship could unlock outsized upside. The GSEs were recapitalized after the financial crisis with roughly $187 billion injected by Treasury in exchange for about $190 billion of senior preferred stock and warrants, and a controversial "net worth sweep" yielded over $300 billion to the government.

Fannie reported at least $17 billion in profits in both 2023 and 2024 and had roughly $105 billion of shareholder equity at Q3, yet faces an estimated ~$44 billion regulatory capital shortfall; the administration is reportedly considering an IPO of about $30 billion to close the gap. Potential valuations cited by Ackman (~$400 billion combined) and Burry (1.5–2x book value post‑IPO) imply large upside versus current common market caps of roughly $13 billion (Fannie) and $7 billion (Freddie), but dilution from senior preferred, warrants and junior preferred debt remains a material constraint.

Key execution risks are political and legal: unwinding government ownership may require Congressional involvement and the treatment of prior net‑worth sweep payments is contested, while removing implied government backing could push mortgage rates up 0.5–1%, reducing political appetite for reform. Given these factors, junior preferred instruments are described as lower‑risk/lower‑upside, common shares as high‑risk/high‑reward, and current market sentiment is mildly positive but speculative with moderate market impact.

Key Decisions for Investors

• Allocate only a small, speculative position to common FNMA/FMCC shares if you have high risk tolerance and a multi‑year horizon given valuation upside but substantial political/legal execution risk
• Prefer junior preferred securities over common equity to capture priority in capital structure and reduce tail risk while accepting lower upside
• Hedge or limit position size and monitor specific triggers: Treasury treatment of prior net‑worth sweep payments, progress against the ~44 billion capital shortfall, any announced IPO size (~$30 billion), and Congressional actions
• Watch U.S. mortgage rate moves (a 0.5–1% rise would likely reduce reform momentum) and be prepared to trim exposure if political momentum stalls or dilution terms become unfavorable