Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged during the first quarter. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 40% and 25% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the first 5 months of 2019 and outperformed the broader market benchmark by 6.6 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
PennyMac Mortgage Investment Trust (NYSE:PMT) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that PMT isn’t among the 30 most popular stocks among hedge funds.
In the eyes of most investors, hedge funds are perceived as worthless, old investment vehicles of yesteryear. While there are more than 8000 funds trading today, We choose to focus on the elite of this club, about 750 funds. These investment experts orchestrate the lion’s share of all hedge funds’ total capital, and by observing their highest performing equity investments, Insider Monkey has unsheathed a few investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points per year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
We’re going to take a peek at the recent hedge fund action regarding PennyMac Mortgage Investment Trust (NYSE:PMT).
How have hedgies been trading PennyMac Mortgage Investment Trust (NYSE:PMT)?
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 55% from the fourth quarter of 2018. On the other hand, there were a total of 10 hedge funds with a bullish position in PMT a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Marshall Wace LLP held the most valuable stake in PennyMac Mortgage Investment Trust (NYSE:PMT), which was worth $14 million at the end of the first quarter. On the second spot was Citadel Investment Group which amassed $6.7 million worth of shares. Moreover, Ellington, Renaissance Technologies, and Millennium Management were also bullish on PennyMac Mortgage Investment Trust (NYSE:PMT), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, some big names were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the largest position in PennyMac Mortgage Investment Trust (NYSE:PMT). Marshall Wace LLP had $14 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also initiated a $5.2 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, David Rodriguez-Fraile’s BlueMar Capital Management, and Roger Ibbotson’s Zebra Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as PennyMac Mortgage Investment Trust (NYSE:PMT) but similarly valued. We will take a look at eHealth, Inc. (NASDAQ:EHTH), GreenTree Hospitality Group Ltd. (NYSE:GHG), Grupo Simec S.A.B. de C.V. (NYSE:SIM), and CSG Systems International, Inc. (NASDAQ:CSGS). All of these stocks’ market caps are closest to PMT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EHTH | 23 | 399035 | 4 |
| GHG | 9 | 33875 | 2 |
| SIM | 2 | 2259 | 1 |
| CSGS | 17 | 184079 | 2 |
| Average | 12.75 | 154812 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $52 million in PMT’s case. eHealth, Inc. (NASDAQ:EHTH) is the most popular stock in this table. On the other hand Grupo Simec S.A.B. de C.V. (NYSE:SIM) is the least popular one with only 2 bullish hedge fund positions. PennyMac Mortgage Investment Trust (NYSE:PMT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on PMT as the stock returned 8.6% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
