Trade Alert 2025-06-25

Trades placed:

• Purchased 1,239 shares of PMT-A (PMT-A) at $23.23 per share. This new position represents about 1.66% of my portfolio.

Some investors may find anything issued by PennyMac (PMT) unsuitable as the management is attempting to screw the preferred shareholders by refusing to admit that their fixed-to-floating shares must float. I completely respect that view. PMT is currently in a lawsuit over the matter (which we’ve covered extensively). The judge indicated he was favoring the plaintiffs (saying PMT was wrong), but the case is currently in appeal. This is a pre-emptive appeal, as the final ruling hasn’t been handed down by the initial judge.

Shares of PMT-A and PMT-B both got smacked today and were down around 2%.  Among the mortgage REIT preferred shares, they are on the largest daily decline.

I was initially bidding on PMT-B, but had no execution. Consequently, I moved my bid over to PMT-A and achieved a quick execution. I’m running this trade in a tax-advantaged account and my objective is not to hold the shares indefinitely. We’ve seen these shares swing a few times between prices around the low $23s up to prices near $25.00. I’m not one to try to get the very highest price. I just go in when it looks cheap and go out when it stops looking cheap.

Here’s a chart showing our trading history for PMT-A and PMT-B:

There were dividends also, but this chart provides a very quick overview. That’s all I’m doing. The price falls, I grab some shares. The price goes up, I dump the shares. Our catalyst for an eventual recovery in the price is the idea that PMT should lose the court case. That is NOT guaranteed. We simply think it’s a reasonably high probability. But it can take a long time. If we knew for sure it would happen, we would be more inclined to hold the shares until it happened. Since we don’t know it will happen, we are happy to close out positions whenever the price gets high enough to reflect a high probability of PMT losing.

Note: Before placing this trade I doubled check our known listings for any new filings from the court cases: