At Insider Monkey, we pore over the filings of nearly 867 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30th. In this article, we will use that wealth of knowledge to determine whether or not PennyMac Financial Services Inc (NYSE:PFSI) makes for a good investment right now.
PennyMac Financial Services Inc (NYSE:PFSI) was in 33 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. PFSI investors should be aware of an increase in activity from the world’s largest hedge funds recently. There were 26 hedge funds in our database with PFSI positions at the end of the second quarter. Our calculations also showed that PFSI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Matthew Lindenbaum of Basswood Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s view the fresh hedge fund action regarding PennyMac Financial Services Inc (NYSE:PFSI).
Do Hedge Funds Think PFSI Is A Good Stock To Buy Now?
At third quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PFSI over the last 25 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, MFN Partners was the largest shareholder of PennyMac Financial Services Inc (NYSE:PFSI), with a stake worth $215.9 million reported as of the end of September. Trailing MFN Partners was Rima Senvest Management, which amassed a stake valued at $123.3 million. Basswood Capital, Clough Capital Partners, and PAR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position MFN Partners allocated the biggest weight to PennyMac Financial Services Inc (NYSE:PFSI), around 9.9% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, designating 4.76 percent of its 13F equity portfolio to PFSI.
Consequently, specific money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the biggest position in PennyMac Financial Services Inc (NYSE:PFSI). Arrowstreet Capital had $3.4 million invested in the company at the end of the quarter. Mika Toikka’s AlphaCrest Capital Management also initiated a $2.6 million position during the quarter. The following funds were also among the new PFSI investors: Paul Tudor Jones’s Tudor Investment Corp, Jinghua Yan’s TwinBeech Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now review hedge fund activity in other stocks similar to PennyMac Financial Services Inc (NYSE:PFSI). We will take a look at Eastern Bankshares, Inc. (NASDAQ:EBC), Tronox Holdings Plc (NYSE:TROX), Definitive Healthcare Corp. (NASDAQ:DH), Moelis & Company (NYSE:MC), Summit Materials Inc (NYSE:SUM), Fabrinet (NYSE:FN), and MaxLinear, Inc. (NYSE:MXL). This group of stocks’ market caps are similar to PFSI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EBC | 19 | 126087 | -1 |
| TROX | 38 | 356965 | 2 |
| DH | 23 | 210282 | 23 |
| MC | 25 | 147307 | 7 |
| SUM | 21 | 108335 | 1 |
| FN | 18 | 157879 | 4 |
| MXL | 24 | 155869 | 3 |
| Average | 24 | 180389 | 5.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $741 million in PFSI’s case. Tronox Holdings Plc (NYSE:TROX) is the most popular stock in this table. On the other hand Fabrinet (NYSE:FN) is the least popular one with only 18 bullish hedge fund positions. PennyMac Financial Services Inc (NYSE:PFSI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PFSI is 77.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately PFSI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PFSI were disappointed as the stock returned 3.9% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Pnmac Holdings Inc. (NYSE:PFSI)
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Disclosure: None. This article was originally published at Insider Monkey.
