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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards PennyMac Financial Services Inc (NYSE:PFSI).
PennyMac Financial Services Inc (NYSE:PFSI) has seen an increase in activity from the world's largest hedge funds lately. Our calculations also showed that PFSI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most market participants, hedge funds are seen as underperforming, outdated investment tools of yesteryear. While there are over 8000 funds trading at present, We choose to focus on the moguls of this group, approximately 850 funds. It is estimated that this group of investors have their hands on most of the smart money's total capital, and by keeping an eye on their inimitable picks, Insider Monkey has brought to light several investment strategies that have historically surpassed the market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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Ken Heebner of Capital Growth Management[/caption]
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 these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the 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 look at the fresh hedge fund action surrounding PennyMac Financial Services Inc (NYSE:PFSI).
How are hedge funds trading PennyMac Financial Services Inc (NYSE:PFSI)?
Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in PFSI a year ago. 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, Rima Senvest Management held the most valuable stake in PennyMac Financial Services Inc (NYSE:PFSI), which was worth $31.7 million at the end of the third quarter. On the second spot was Clough Capital Partners which amassed $24.5 million worth of shares. Capital Growth Management, Renaissance Technologies, 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 Strycker View Capital allocated the biggest weight to PennyMac Financial Services Inc (NYSE:PFSI), around 18.52% of its 13F portfolio. OCO Capital Partners is also relatively very bullish on the stock, dishing out 7.26 percent of its 13F equity portfolio to PFSI.
As aggregate interest increased, specific money managers have jumped into PennyMac Financial Services Inc (NYSE:PFSI) headfirst. Clough Capital Partners, managed by Charles Clough, created the most outsized position in PennyMac Financial Services Inc (NYSE:PFSI). Clough Capital Partners had $24.5 million invested in the company at the end of the quarter. Ken Heebner's Capital Growth Management also initiated a $23.9 million position during the quarter. The other funds with new positions in the stock are Usman Waheed's Strycker View Capital, Paul Marshall and Ian Wace's Marshall Wace LLP, and Benjamin A. Smith's Laurion Capital Management.
Let's now review hedge fund activity in other stocks similar to PennyMac Financial Services Inc (NYSE:PFSI). These stocks are PJT Partners Inc (NYSE:PJT), Helmerich & Payne, Inc. (NYSE:HP), Hancock Whitney Corporation (NASDAQ:HWC), and Atlantic Union Bankshares Corporation (NASDAQ:AUB). This group of stocks' market values are similar to PFSI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PJT,22,88247,2 HP,27,114660,-6 HWC,20,40474,4 AUB,10,14509,2 Average,19.75,64473,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $210 million in PFSI's case. Helmerich & Payne, Inc. (NYSE:HP) is the most popular stock in this table. On the other hand Atlantic Union Bankshares Corporation (NASDAQ:AUB) is the least popular one with only 10 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 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on PFSI as the stock returned 60.9% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.