"When you talk about what you could be concerned about as an investor in this company, that would certainly figure into the analysis," said one hedge fund manager whose fund owns shares of Farmer Mac and who did not want to be quoted by name.
Some value investors who own the stock say that the company has stronger fundamentals than the market is giving it credit for.
"If you look at the leverage within the farm system, it's not nearly as high (as in residential mortgages) and it isn't going out of whack like the residential space was," said Howard Lu, a portfolio manager with First Wilshire, a Pasadena, California-based money management firm with $650 million in assets under management which owns Farmer Mac stock.
The Kansas City Fed estimates that the debt to asset ratio in the farm sector is currently around 10 percent, well below the 25 percent mark associated with the collapse of the 1980s. By comparison, debt to asset ratios topped 25 percent in the residential mortgage sector leading up to the 2008 financial crisis.
Lu said that the company is still "significantly" undervalued because of its earnings growth. Farmer Mac reported core earnings of $1.48 per share in its most recent quarter, a 27.9 percent gain from the same period last year.
The company is little followed by Wall Street, in part because its market cap is so small that large-asset funds can't invest much more than $20 million in the company without becoming a significant holder in the shares and distorting prices. As a result, its shareholders tend to be small mutual funds and hedge funds.
The one analyst polled by Reuters who covers the company, Evan Hutto at Compass Point, rates it a buy, with a target price of $42, a roughly 25 percent increase from its current price of approximately $34. New York-based Sidoti & Company initiated coverage Wednesday with a price target of $44.
Hutto looks for positive price moves after Congress passes a farm bill and when concerns abate that Farmer Mac will be hurt by falling farm prices. Rising interest rates could also push Farmer Mac's loan volumes higher. Unlike Freddie Mac and Fannie Mae, Farmer Mac has largely been exempt from Republican bills that would unwind government-sponsored enterprises.
"This is a company that's had tremendous growth but has been falling under the radar," Hutto said. "Now they need to prove that they're for real."