Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
PennyMac Mortgage Investment Trust (NYSE:PMT) was in 13 hedge funds’ portfolios at the end of September. PMT shareholders have witnessed a decrease in hedge fund sentiment recently. There were 14 hedge funds in our database with PMT holdings at the end of the second quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Fortuna Silver Mines Inc. (NYSE:FSM), Aerie Pharmaceuticals Inc (NASDAQ:AERI), and James River Group Holdings Ltd (NASDAQ:JRVR) to gather more data points.
Follow Pennymac Mortgage Investment Trust (NYSE:PMT)
Follow Pennymac Mortgage Investment Trust (NYSE:PMT)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What have hedge funds been doing with PennyMac Mortgage Investment Trust (NYSE:PMT)?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 7% dip from the previous quarter. The graph below displays the number of hedge funds with bullish positions in PMT over the last 5 quarters, which has trended down slightly during that time. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Charles Clough’s Clough Capital Partners has the biggest position in PennyMac Mortgage Investment Trust (NYSE:PMT), worth close to $21 million, amounting to 1.1% of its total 13F portfolio. Sitting at the No. 2 spot is Highfields Capital Management, led by Jonathon Jacobson, which holds a $7.8 million position. Remaining hedge funds and institutional investors that hold long positions consist of Richard Mashaal’s RIMA Senvest Management, Porter Collins, Daniel Moses, and Vincent Daniel’s Seawolf Capital, and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Since PennyMac Mortgage Investment Trust (NYSE:PMT) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedgies who were dropping their full holdings in the third quarter. Interestingly, Gregg Moskowitz’s Interval Partners got rid of the biggest investment of the “upper crust” of funds studied by Insider Monkey, totaling about $3.6 million in stock, and Eric Halet and Davide Serra’s Algebris Investments was right behind this move, as the fund dropped about $1.9 million worth of shares.
Let’s also examine hedge fund activity in other stocks similar to PennyMac Mortgage Investment Trust (NYSE:PMT). These stocks are Fortuna Silver Mines Inc. (NYSE:FSM), Aerie Pharmaceuticals Inc (NASDAQ:AERI), James River Group Holdings Ltd (NASDAQ:JRVR), and Amicus Therapeutics, Inc. (NASDAQ:FOLD). This group of stocks’ market valuations resemble PMT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FSM | 11 | 39329 | 1 |
| AERI | 31 | 395104 | 14 |
| JRVR | 12 | 528157 | 3 |
| FOLD | 21 | 373077 | -2 |
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $334 million. That figure was $38 million in PMT’s case. Aerie Pharmaceuticals Inc (NASDAQ:AERI) is the most popular stock in this table. On the other hand Fortuna Silver Mines Inc. (NYSE:FSM) is the least popular one with only 11 bullish hedge fund positions. PennyMac Mortgage Investment Trust (NYSE:PMT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AERI might be a better candidate to consider taking a long position in.
Disclosure: None
