Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the nearly unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Cowen Inc. (NASDAQ:COWN) has experienced a decrease in activity from the world's largest hedge funds recently. COWN was in 19 hedge funds' portfolios at the end of the second quarter of 2019. There were 21 hedge funds in our database with COWN holdings at the end of the previous quarter. Our calculations also showed that COWN isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most stock holders, hedge funds are seen as underperforming, old investment vehicles of the past. While there are over 8000 funds with their doors open today, Our researchers choose to focus on the moguls of this group, around 750 funds. These investment experts control the majority of the hedge fund industry's total asset base, and by tracking their inimitable picks, Insider Monkey has figured out a number of investment strategies that have historically outstripped the broader indices. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's view the latest hedge fund action encompassing Cowen Inc. (NASDAQ:COWN).
Hedge fund activity in Cowen Inc. (NASDAQ:COWN)
At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the first quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in COWN a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Ariel Investments held the most valuable stake in Cowen Inc. (NASDAQ:COWN), which was worth $17.6 million at the end of the second quarter. On the second spot was D E Shaw which amassed $17.2 million worth of shares. Moreover, Millennium Management, GLG Partners, and Mendon Capital Advisors were also bullish on Cowen Inc. (NASDAQ:COWN), allocating a large percentage of their portfolios to this stock.
Seeing as Cowen Inc. (NASDAQ:COWN) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of money managers who sold off their entire stakes last quarter. It's worth mentioning that Paul J. Isaac's Arbiter Partners Capital Management dumped the biggest stake of the "upper crust" of funds tracked by Insider Monkey, comprising an estimated $24.1 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund said goodbye to about $2.4 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Cowen Inc. (NASDAQ:COWN) but similarly valued. We will take a look at American Outdoor Brands Corporation (NASDAQ:AOBC), Dorian LPG Ltd (NYSE:LPG), Akero Therapeutics, Inc. (NASDAQ:AKRO), and Exterran Corporation (NYSE:EXTN). All of these stocks' market caps match COWN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AOBC,16,85438,1 LPG,10,101721,1 AKRO,15,74921,15 EXTN,14,66299,-4 Average,13.75,82095,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $77 million in COWN's case. American Outdoor Brands Corporation (NASDAQ:AOBC) is the most popular stock in this table. On the other hand Dorian LPG Ltd (NYSE:LPG) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Cowen Inc. (NASDAQ:COWN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately COWN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on COWN were disappointed as the stock returned -10.5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.