The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Ocwen Financial Corporation (NYSE:OCN) and determine whether the smart money was really smart about this stock.
Hedge fund interest in Ocwen Financial Corporation (NYSE:OCN) 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 OCN to other stocks including Rayonier Advanced Materials Inc (NYSE:RYAM), PRGX Global Inc (NASDAQ:PRGX), and Celcuity Inc. (NASDAQ:CELC) 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a peek at the recent hedge fund action regarding Ocwen Financial Corporation (NYSE:OCN).
How have hedgies been trading Ocwen Financial Corporation (NYSE:OCN)?
Heading into the second quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards OCN over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Leon Cooperman’s Omega Advisors has the largest position in Ocwen Financial Corporation (NYSE:OCN), worth close to $6.6 million, comprising 0.9% of its total 13F portfolio. On Omega Advisors’s heels is Noam Gottesman of GLG Partners, with a $1.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism include Eric Schneider’s OCO Capital Partners, D. E. Shaw’s D E Shaw and Renaissance Technologies. In terms of the portfolio weights assigned to each position OCO Capital Partners allocated the biggest weight to Ocwen Financial Corporation (NYSE:OCN), around 1.22% of its 13F portfolio. Omega Advisors is also relatively very bullish on the stock, setting aside 0.85 percent of its 13F equity portfolio to OCN.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: CQS Cayman LP. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Marshall Wace LLP).
Let’s check out 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 Rayonier Advanced Materials Inc (NYSE:RYAM), PRGX Global Inc (NASDAQ:PRGX), Celcuity Inc. (NASDAQ:CELC), and Akerna Corp. (NASDAQ:KERN). All of these stocks’ market caps are similar to OCN’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $11 million in OCN’s case. Rayonier Advanced Materials Inc (NYSE:RYAM) is the most popular stock in this table. On the other hand Celcuity Inc. (NASDAQ:CELC) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Ocwen Financial Corporation (NYSE:OCN) 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on OCN as the stock returned 32% in Q2 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.