Cowen Inc. (COWN): Hedge Fund Sentiment Unchanged

In this article you are going to find out whether hedge funds think Cowen Inc. (NASDAQ:COWN) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Hedge fund interest in Cowen Inc. (NASDAQ:COWN) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare COWN to other stocks including Domo Inc. (NASDAQ:DOMO), Unity Biotechnology, Inc. (NASDAQ:UBX), and Rimini Street, Inc. (NASDAQ:RMNI) to get a better sense of its popularity.

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 58 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.

Arbiter Partners Capital Management's Returns, AUM and Holdings

Paul Isaac of Arbiter Partners Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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. Keeping this in mind let’s take a peek at the key hedge fund action encompassing Cowen Inc. (NASDAQ:COWN).

How have hedgies been trading Cowen Inc. (NASDAQ:COWN)?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in COWN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is COWN A Good Stock To Buy?

The largest stake in Cowen Inc. (NASDAQ:COWN) was held by Arbiter Partners Capital Management, which reported holding $16.4 million worth of stock at the end of September. It was followed by Ariel Investments with a $7.6 million position. Other investors bullish on the company included D E Shaw, Balyasny Asset Management, and Millennium Management. In terms of the portfolio weights assigned to each position Arbiter Partners Capital Management allocated the biggest weight to Cowen Inc. (NASDAQ:COWN), around 2.45% of its 13F portfolio. Azora Capital is also relatively very bullish on the stock, earmarking 0.81 percent of its 13F equity portfolio to COWN.

Due to the fact that Cowen Inc. (NASDAQ:COWN) has faced falling interest from hedge fund managers, it’s easy to see that there is a sect of money managers that slashed their entire stakes by the end of the first quarter. Interestingly, Jeffrey Hinkle’s Shoals Capital Management dumped the largest investment of the “upper crust” of funds watched by Insider Monkey, worth an estimated $2.9 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund dumped about $0.2 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Cowen Inc. (NASDAQ:COWN). We will take a look at Domo Inc. (NASDAQ:DOMO), Unity Biotechnology, Inc. (NASDAQ:UBX), Rimini Street, Inc. (NASDAQ:RMNI), and Newtek Business Services Corp (NASDAQ:NEWT). All of these stocks’ market caps are similar to COWN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DOMO 15 72386 -3
UBX 5 2370 -2
RMNI 7 132213 -2
NEWT 8 7880 1
Average 8.75 53712 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $55 million in COWN’s case. Domo Inc. (NASDAQ:DOMO) is the most popular stock in this table. On the other hand Unity Biotechnology, Inc. (NASDAQ:UBX) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Cowen Inc. (NASDAQ:COWN) is more popular among hedge funds. 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 returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on COWN as the stock returned 57.8% so far in Q2 (through June 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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