Ocwen Financial Corp (OCN): Billionaire Israel Englander’s Small Cap Picks

Millennium more than doubled its stake in mortgage servicing company Home Loan Servicing Solutions Ltd (NASDAQ:HLSS) and owned 2.4 million shares as of the beginning of January. At current prices and going by recent dividend payments, Home Loan Servicing Solutions Ltd (NASDAQ:HLSS) pays a dividend yield of over 6%. The stock is up 65% in the last year, driven by the same fundamentals which have carried Ocwen Financial Corp (NYSE:OCN) higher, and while we would again be cautious the high yield should make it worth a look for income investors. Pine River Capital Management, managed by Brian Taylor, was another major shareholder in the company.

Eagle Materials, Inc. (NYSE:EXP), a $3.2 billion market cap provider of cement and other construction materials, was another of Englander’s small cap picks. Eagle Materials, Inc. (NYSE:EXP) is another stock which has risen strongly in the last year (up 86%), is tied to the housing market, and has some quite optimistic expectations from Wall Street analysts. Specifically, the forward P/E is 23 and even if the company hits earnings targets it would still require strong growth from that point. Point State Capital, managed by several former portfolio managers at Duquesne Capital, was buying shares in Q4 (research more stocks Point State was buying).

The 13F disclosed ownership of about 860,000 shares of Penn National Gaming, Inc (NASDAQ:PENN), a manager of gaming facilities. Casinos and other gaming companies are currently trading at high multiples of their trailing earnings, and Penn National Gaming, Inc (NASDAQ:PENN) is no exception with a trailing P/E of 26. Revenue was up 10% in its most recent quarterly report compared to the fourth quarter of 2011, but net income decreased and we don’t think that the industry in general is a good value. Par Capital Management closed December with 2.5 million shares in its portfolio according to that fund’s own 13F (see more stocks Par likes).

Disclosure: I own no shares of any stocks mentioned in this article.