The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought PennyMac Financial Services Inc (NYSE:PFSI) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is PennyMac Financial Services Inc (NYSE:PFSI) a buy here? Money managers were taking a bullish view. The number of bullish hedge fund bets advanced by 1 in recent months. PennyMac Financial Services Inc (NYSE:PFSI) was in 25 hedge funds’ portfolios at the end of June. The all time high for this statistics is 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PFSI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 24 hedge funds in our database with PFSI holdings at the end of March.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Reeder of PAR Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we’re going to take a peek at the fresh hedge fund action regarding PennyMac Financial Services Inc (NYSE:PFSI).
How have hedgies been trading PennyMac Financial Services Inc (NYSE:PFSI)?
At Q2’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards PFSI over the last 20 quarters. 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, Rima Senvest Management held the most valuable stake in PennyMac Financial Services Inc (NYSE:PFSI), which was worth $59.9 million at the end of the third quarter. On the second spot was Clough Capital Partners which amassed $57.5 million worth of shares. PAR Capital Management, Basswood Capital, and Renaissance Technologies 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 OCO Capital Partners allocated the biggest weight to PennyMac Financial Services Inc (NYSE:PFSI), around 16.12% of its 13F portfolio. Clough Capital Partners is also relatively very bullish on the stock, designating 5.63 percent of its 13F equity portfolio to PFSI.
As aggregate interest increased, some big names have been driving this bullishness. Rubric Capital Management, managed by David Rosen, established the most valuable position in PennyMac Financial Services Inc (NYSE:PFSI). Rubric Capital Management had $17.2 million invested in the company at the end of the quarter. George Soros’s Soros Fund Management also made a $15.9 million investment in the stock during the quarter. The following funds were also among the new PFSI investors: Nathaniel August’s Mangrove Partners, Ken Grossman and Glen Schneider’s SG Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as PennyMac Financial Services Inc (NYSE:PFSI) but similarly valued. We will take a look at ADC Therapeutics SA (NYSE:ADCT), MasTec, Inc. (NYSE:MTZ), Colfax Corporation (NYSE:CFX), Quaker Chemical Corp (NYSE:KWR), OneMain Holdings Inc (NYSE:OMF), Medpace Holdings, Inc. (NASDAQ:MEDP), and Murphy USA Inc. (NYSE:MUSA). This group of stocks’ market valuations resemble PFSI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADCT | 15 | 490195 | 15 |
| MTZ | 29 | 160492 | 5 |
| CFX | 39 | 607479 | 7 |
| KWR | 13 | 159316 | 5 |
| OMF | 37 | 342546 | 3 |
| MEDP | 22 | 220276 | 5 |
| MUSA | 27 | 301412 | 3 |
| Average | 26 | 325959 | 6.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $326 million. That figure was $352 million in PFSI’s case. Colfax Corporation (NYSE:CFX) is the most popular stock in this table. On the other hand Quaker Chemical Corp (NYSE:KWR) is the least popular one with only 13 bullish hedge fund positions. PennyMac Financial Services Inc (NYSE:PFSI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PFSI is 59.1. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on PFSI as the stock returned 34% since the end of June (through September 25th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
