World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Ocwen Financial Corporation (NYSE:OCN) has seen an increase in enthusiasm from smart money recently. OCN was in 15 hedge funds' portfolios at the end of the first quarter of 2019. There were 11 hedge funds in our database with OCN holdings at the end of the previous quarter. Our calculations also showed that OCN isn't among the 30 most popular stocks among hedge funds.
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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's take a look at the fresh hedge fund action encompassing Ocwen Financial Corporation (NYSE:OCN).
What have hedge funds been doing with Ocwen Financial Corporation (NYSE:OCN)?
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in OCN a year ago. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Among these funds, Omega Advisors held the most valuable stake in Ocwen Financial Corporation (NYSE:OCN), which was worth $16.5 million at the end of the first quarter. On the second spot was GLG Partners which amassed $5.3 million worth of shares. Moreover, CQS Cayman LP, Marshall Wace LLP, and Renaissance Technologies were also bullish on Ocwen Financial Corporation (NYSE:OCN), allocating a large percentage of their portfolios to this stock.
Now, key hedge funds were leading the bulls' herd. Millennium Management, managed by Israel Englander, established the largest position in Ocwen Financial Corporation (NYSE:OCN). Millennium Management had $0.1 million invested in the company at the end of the quarter. Michael Platt and William Reeves's BlueCrest Capital Mgmt. also initiated a $0 million position during the quarter. The following funds were also among the new OCN investors: Michael Gelband's ExodusPoint Capital and David Harding's Winton Capital Management.
Let's check out hedge fund activity in other stocks similar to Ocwen Financial Corporation (NYSE:OCN). We will take a look at Sify Technologies Limited (NASDAQ:SIFY), Intec Pharma Ltd (NASDAQ:NTEC), Celsius Holdings, Inc. (NASDAQ:CELH), and Amber Road Inc (NYSE:AMBR). This group of stocks' market valuations match OCN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SIFY,2,869,0 NTEC,10,48079,1 CELH,2,150,2 AMBR,11,62499,2 Average,6.25,27899,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $30 million in OCN's case. Amber Road Inc (NYSE:AMBR) is the most popular stock in this table. On the other hand Sify Technologies Limited (NASDAQ:SIFY) 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately OCN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on OCN were disappointed as the stock returned -4.9% during the same period 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.