Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is PennyMac Mortgage Investment Trust (NYSE:PMT) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
PennyMac Mortgage Investment Trust (NYSE:PMT) has experienced an increase in hedge fund interest lately. PMT was in 19 hedge funds’ portfolios at the end of December. There were 15 hedge funds in our database with PMT positions at the end of the previous quarter. Our calculations also showed that PMT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
At the moment there are dozens of formulas stock traders have at their disposal to appraise publicly traded companies. A duo of the best formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best fund managers can beat the broader indices by a superb margin (see the details here).
Jeffrey Talpins of Element Capital
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a glance at the new hedge fund action surrounding PennyMac Mortgage Investment Trust (NYSE:PMT).
How have hedgies been trading PennyMac Mortgage Investment Trust (NYSE:PMT)?
At the end of the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PMT over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in PennyMac Mortgage Investment Trust (NYSE:PMT), which was worth $30.4 million at the end of the third quarter. On the second spot was Winton Capital Management which amassed $23.9 million worth of shares. Clough Capital Partners, Millennium Management, and Laurion 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 Clough Capital Partners allocated the biggest weight to PennyMac Mortgage Investment Trust (NYSE:PMT), around 1.9% of its 13F portfolio. Pinz Capital is also relatively very bullish on the stock, dishing out 1.58 percent of its 13F equity portfolio to PMT.
As one would reasonably expect, some big names have jumped into PennyMac Mortgage Investment Trust (NYSE:PMT) headfirst. Laurion Capital Management, managed by Benjamin A. Smith, established the biggest position in PennyMac Mortgage Investment Trust (NYSE:PMT). Laurion Capital Management had $7.5 million invested in the company at the end of the quarter. Jeffrey Talpins’s Element Capital Management also initiated a $5.2 million position during the quarter. The other funds with new positions in the stock are Matthew L Pinz’s Pinz Capital, Richard Driehaus’s Driehaus Capital, and Lawrence Raiman’s LDR Capital.
Let’s also examine hedge fund activity in other stocks similar to PennyMac Mortgage Investment Trust (NYSE:PMT). We will take a look at Verra Mobility Corporation (NASDAQ:VRRM), Turning Point Therapeutics, Inc. (NASDAQ:TPTX), Trustmark Corp (NASDAQ:TRMK), and eHealth, Inc. (NASDAQ:EHTH). This group of 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 |
|---|---|---|---|
| VRRM | 33 | 300381 | 17 |
| TPTX | 23 | 560633 | 3 |
| TRMK | 16 | 18756 | 1 |
| EHTH | 26 | 458734 | 4 |
| Average | 24.5 | 334626 | 6.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $335 million. That figure was $127 million in PMT’s case. Verra Mobility Corporation (NASDAQ:VRRM) is the most popular stock in this table. On the other hand Trustmark Corp (NASDAQ:TRMK) is the least popular one with only 16 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately PMT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PMT investors were disappointed as the stock returned -64.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
