Why PennyMac Financial Services (PFSI) Stock is a Compelling Investment Case

Gator Capital Management recently released its Q3 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 13.18% for the third quarter, outperforming its benchmark, the S&P 500 Index which returned 8.93% in the same quarter. You should check out Gator Capital Management’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.

In the said letter, Gator Capital Management highlighted a few stocks and PennyMac Financial Services Inc. (NYSE:PFSI) is one of them. PennyMac Financial Services Inc. (NYSE:PFSI) provides mortgage lending services. Year-to-date, PennyMac Financial Services Inc. (NYSE:PFSI) stock gained 50.8% and on October 29th it had a closing price of $51.34. Here is what Gator Capital Management said:

“Mortgage banking companies continued to have strong performance in Q3. PennyMac Financial Services (“PFSI”) was up 39.5%. In Q3, mortgage spreads continued to stay wide like they were in Q2. We hold this position as we expect PFSI to post strong results again in Q3.”

In Q2 2020, the number of bullish hedge fund positions on PennyMac Financial Services Inc. (NYSE:PFSI) stock increased by about 4% from the previous quarter (see the chart here), so a number of other hedge fund managers believe in PennyMac’s growth potential. Our calculations showed that PennyMac Financial Services Inc. (NYSE:PFSI) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. 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 enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.