How Ocwen Financial Corp (OCN) Stacks Up Against Its Peers

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Ocwen Financial Corp (NYSE:OCN) shareholders have witnessed an increase in enthusiasm from smart money in recent months. OCN was in 17 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with OCN positions at the end of the previous quarter. 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 Boulevard Acquisition Corp II (NASDAQ:BLVD), Catchmark Timber Trust Inc (NYSE:CTT), and NewStar Financial Inc (NASDAQ:NEWS) to gather more data points.

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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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What have hedge funds been doing with Ocwen Financial Corp (NYSE:OCN)?

Heading into the fourth quarter of 2016, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a growth of 6% from one quarter earlier. On the other hand, there were a total of 23 hedge funds with a bullish position in OCN at the beginning of this year. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).


When looking at the institutional investors followed by Insider Monkey, Michael Blitzer’s Kingstown Capital Management has the biggest position in Ocwen Financial Corp (NYSE:OCN), worth close to $31.2 million, corresponding to 3.5% of its total 13F portfolio. On Kingstown Capital Management’s heels is Tegean Capital Management, led by Thomas G. Maheras, holding a $5.3 million position; 5.8% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism consist of Michael Hintze’s CQS Cayman LP, Millennium Management, one of the 10 largest hedge funds in the world and Michael Kao’s Akanthos Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Consequently, specific money managers were breaking ground themselves. Millennium Management created the most valuable position in Ocwen Financial Corp (NYSE:OCN). Millennium Management had $4.1 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s also examine hedge fund activity in other stocks similar to Ocwen Financial Corp (NYSE:OCN). We will take a look at Boulevard Acquisition Corp II (NASDAQ:BLVD), Catchmark Timber Trust Inc (NYSE:CTT), NewStar Financial Inc (NASDAQ:NEWS), and Everbridge Inc (NASDAQ:EVBG). This group of stocks’ market caps are closest to OCN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BLVD 11 146114 0
CTT 13 34095 2
NEWS 4 118119 0
EVBG 13 25290 13

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $63 million in OCN’s case. Catchmark Timber Trust Inc (NYSE:CTT) is the most popular stock in this table. On the other hand NewStar Financial Inc (NASDAQ:NEWS) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Ocwen Financial Corp (NYSE:OCN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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