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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Cowen Inc. (NASDAQ:COWN).
Cowen Inc. (NASDAQ:COWN) has experienced an increase in support from the world's most elite money managers of late. Cowen Inc. (NASDAQ:COWN) was in 27 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that COWN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Isaac of Arbiter Partners Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to take a look at the latest hedge fund action encompassing Cowen Inc. (NASDAQ:COWN).
Do Hedge Funds Think COWN Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in COWN over the last 23 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Cowen Inc. (NASDAQ:COWN) was held by Azora Capital, which reported holding $46.5 million worth of stock at the end of December. It was followed by Arbiter Partners Capital Management with a $37.6 million position. Other investors bullish on the company included D E Shaw, Driehaus Capital, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Azora Capital allocated the biggest weight to Cowen Inc. (NASDAQ:COWN), around 5.84% of its 13F portfolio. Arbiter Partners Capital Management is also relatively very bullish on the stock, setting aside 2.72 percent of its 13F equity portfolio to COWN.
As one would reasonably expect, key money managers have been driving this bullishness. Kingstown Capital Management, managed by Michael Blitzer, established the largest position in Cowen Inc. (NASDAQ:COWN). Kingstown Capital Management had $5.3 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also initiated a $3.3 million position during the quarter. The other funds with new positions in the stock are Parsa Kiai's Steamboat Capital Partners, Michael Gelband's ExodusPoint Capital, and Bruce Kovner's Caxton Associates LP.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Cowen Inc. (NASDAQ:COWN) but similarly valued. These stocks are WisdomTree Investments, Inc. (NASDAQ:WETF), BellRing Brands, Inc. (NYSE:BRBR), Standard Motor Products, Inc. (NYSE:SMP), Smith & Wesson Brands, Inc. (NASDAQ:SWBI), ARMOUR Residential REIT, Inc. (NYSE:ARR), Federal Agricultural Mortgage Corp. (NYSE:AGM), and Suburban Propane Partners LP (NYSE:SPH). This group of stocks' market valuations are closest to COWN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WETF,18,72682,1 BRBR,14,159499,2 SMP,15,98484,3 SWBI,18,99675,-2 ARR,9,22233,-4 AGM,7,20790,-4 SPH,2,3805,-3 Average,11.9,68167,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.9 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $224 million in COWN's case. WisdomTree Investments, Inc. (NASDAQ:WETF) is the most popular stock in this table. On the other hand Suburban Propane Partners LP (NYSE:SPH) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Cowen Inc. (NASDAQ:COWN) is more popular among hedge funds. Our overall hedge fund sentiment score for COWN is 87. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still managed to beat the market by 6.7 percentage points. Hedge funds were also right about betting on COWN, though not to the same extent, as the stock returned 15.1% since the end of March (through July 9th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.