At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Mr. Cooper Group Inc. (NASDAQ:COOP) was in 27 hedge funds' portfolios at the end of March. COOP investors should be aware of a decrease in hedge fund interest lately. There were 28 hedge funds in our database with COOP positions at the end of the previous quarter. Our calculations also showed that COOP isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a glance at the new hedge fund action encompassing Mr. Cooper Group Inc. (NASDAQ:COOP).
Hedge fund activity in Mr. Cooper Group Inc. (NASDAQ:COOP)
At Q1's end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in COOP a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Mr. Cooper Group Inc. (NASDAQ:COOP) was held by Diamond Hill Capital, which reported holding $77.7 million worth of stock at the end of March. It was followed by Greywolf Capital Management with a $51.8 million position. Other investors bullish on the company included Rubric Capital Management, Serengeti Asset Management, and Appaloosa Management LP.
Since Mr. Cooper Group Inc. (NASDAQ:COOP) has faced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there exists a select few hedgies that slashed their positions entirely last quarter. Intriguingly, Joshua Friedman and Mitchell Julis's Canyon Capital Advisors dumped the largest stake of the 700 funds followed by Insider Monkey, comprising an estimated $3.5 million in stock. Vivian Lau's fund, One Tusk Investment Partners, also cut its stock, about $2.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds last quarter.
Let's now take a look at hedge fund activity in other stocks similar to Mr. Cooper Group Inc. (NASDAQ:COOP). These stocks are AK Steel Holding Corporation (NYSE:AKS), Chase Corporation (NYSEAMEX:CCF), Tidewater Inc. (NYSE:TDW), and NorthStar Realty Europe Corp. (NYSE:NRE). This group of stocks' market values are closest to COOP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AKS,13,29045,-2 CCF,9,89059,4 TDW,15,215883,1 NRE,9,98233,-4 Average,11.5,108055,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. That figure was $310 million in COOP's case. Tidewater Inc. (NYSE:TDW) is the most popular stock in this table. On the other hand Chase Corporation (NYSEAMEX:CCF) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Mr. Cooper Group Inc. (NASDAQ:COOP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately COOP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on COOP were disappointed as the stock returned -15.2% 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.