The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think of small cap stocks. In this article, we take a closer look at Ocwen Financial Corporation (NYSE:OCN) from the perspective of those elite funds.
Hedge fund interest in Ocwen Financial Corporation (NYSE:OCN) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Theravance Inc (NASDAQ:THRX), Veeco Instruments Inc. (NASDAQ:VECO), and BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) to gather more data points.
Today there are numerous signals stock traders use to appraise stocks. A couple of the less known signals are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outpace the broader indices by a solid margin (see the details here).
Now, let’s go over the fresh action regarding Ocwen Financial Corporation (NYSE:OCN).
How have hedgies been trading Ocwen Financial Corporation (NYSE:OCN)?
At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Michael Blitzer’s Kingstown Capital Management has the most valuable position in Ocwen Financial Corporation (NYSE:OCN), worth close to $83.9 million, comprising 9.4% of its total 13F portfolio. The second largest stake is held by Whitebox Advisors, led by Andy Redleaf, holding an $58.5 million position; 2.6% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions encompass Seth Klarman’s Baupost Group, Jonathon Jacobson’s Highfields Capital Management and Noah Levy and Eugene Dozortsev’s Newtyn Management.
Due to the fact that Ocwen Financial Corporation (NYSE:OCN) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of hedge funds that elected to cut their positions entirely heading into Q4. At the top of the heap, Glenn Russell Dubin’s Highbridge Capital Management cut the biggest position of all the hedgies monitored by Insider Monkey, totaling about $2.4 million in call options., and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund dumped about $1.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ocwen Financial Corporation (NYSE:OCN) but similarly valued. We will take a look at Theravance Inc (NASDAQ:THRX), Veeco Instruments Inc. (NASDAQ:VECO), BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX), and Lifelock Inc (NYSE:LOCK). This group of stocks’ market valuations are closest to OCN’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $236 million. That figure was $310 million in OCN’s case. The most popular stock in this table is Lifelock Inc (NYSE:LOCK)), while the least popular one is Veeco Instruments Inc. (NASDAQ:VECO). With as much as 28 bullish hedge fund positions, Ocwen Financial Corporation (NYSE:OCN) is the most popular stock in this particular group. This may indicate it is a good stock to buy. Hence, it may be a good idea to analyze it in detail and potentially make it your choice of investment.