Bill Ackman told spooked investors to get over the Iran war and buy Fannie and Freddie. Stocks surged 40% the next day

Core Viewpoint - Fannie Mae and Freddie Mac are perceived as undervalued by investor Bill Ackman, who suggests they could see significant price increases soon, despite current market fears related to geopolitical tensions [1][2][3]. Group 1: Market Reaction - Following Ackman's recommendation, Fannie Mae's stock surged by as much as 41% and Freddie Mac's by 34% in a single trading day, marking their largest daily increases since May of the previous year [2]. - The surge occurred amidst a backdrop of "extreme fear" in the market due to ongoing conflicts, particularly the war in Iran, which has affected oil prices and overall market performance [3]. Group 2: Financial Performance - Fannie Mae reported a net income of $14.4 billion last year, while Freddie Mac reported $10.7 billion, with their combined market capitalization being approximately $10 billion before the recent surge, indicating they earn more than twice their market value annually [7]. Group 3: Investor Sentiment and Commentary - Michael Burry, known for his role in "The Big Short," echoed Ackman's sentiments, highlighting the rarity of such valuation disparities in the current market and criticizing the conservatorship of Fannie and Freddie for limiting housing supply [8][9]. - Ackman's previous advocacy for the privatization of Fannie and Freddie has been ongoing for over a decade, with his firm being the largest common shareholder in both companies, holding over 210 million shares [4]. Group 4: Future Outlook and Concerns - The potential for privatization through an IPO has been a long-standing thesis since the companies entered conservatorship in 2008, with optimism peaking in September 2025, although both stocks remain down nearly 60% from that peak [10]. - Critics, including economist Wesley Yin, caution that a rushed privatization could lead to increased borrowing costs and replicate conditions that contributed to the Great Recession [11].