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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Cowen Inc. (NASDAQ:COWN) in this article.
Hedge fund interest in Cowen Inc. (NASDAQ:COWN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that COWN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare COWN to other stocks including MagnaChip Semiconductor Corporation (NYSE:MX), Radius Global Infrastructure, Inc. (NASDAQ:RADI), and Altus Midstream Company (NASDAQ:ALTM) to get a better sense of its popularity.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Richard Driehaus of Driehaus Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Keeping this in mind we're going to take a glance at the fresh hedge fund action encompassing Cowen Inc. (NASDAQ:COWN).
Do Hedge Funds Think COWN Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in COWN a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Cowen Inc. (NASDAQ:COWN) was held by Arbiter Partners Capital Management, which reported holding $38.3 million worth of stock at the end of June. It was followed by D E Shaw with a $25.7 million position. Other investors bullish on the company included Azora Capital, Driehaus Capital, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Arbiter Partners Capital Management allocated the biggest weight to Cowen Inc. (NASDAQ:COWN), around 6.37% of its 13F portfolio. Azora Capital is also relatively very bullish on the stock, earmarking 3.69 percent of its 13F equity portfolio to COWN.
Since Cowen Inc. (NASDAQ:COWN) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of money managers that decided to sell off their entire stakes in the second quarter. Interestingly, Ken Griffin's Citadel Investment Group dropped the largest investment of the "upper crust" of funds followed by Insider Monkey, valued at about $49.8 million in stock. Matthew Hulsizer's fund, PEAK6 Capital Management, also cut its stock, about $23.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to Cowen Inc. (NASDAQ:COWN). These stocks are MagnaChip Semiconductor Corporation (NYSE:MX), Radius Global Infrastructure, Inc. (NASDAQ:RADI), Altus Midstream Company (NASDAQ:ALTM), AMMO, Inc. (NASDAQ:POWW), Endo International plc (NASDAQ:ENDP), Lydall, Inc. (NYSE:LDL), and Montauk Renewables, Inc. (NASDAQ:MNTK). This group of stocks' market values are closest to COWN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MX,35,307536,5 RADI,20,378266,3 ALTM,3,1506,-1 POWW,9,11343,2 ENDP,20,227517,3 LDL,22,210877,10 MNTK,6,3533,1 Average,16.4,162940,3.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.4 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $222 million in COWN's case. MagnaChip Semiconductor Corporation (NYSE:MX) is the most popular stock in this table. On the other hand Altus Midstream Company (NASDAQ:ALTM) is the least popular one with only 3 bullish hedge fund positions. Cowen Inc. (NASDAQ:COWN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for COWN is 72.5. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately COWN wasn't nearly as popular as these 5 stocks and hedge funds that were betting on COWN were disappointed as the stock returned -12.2% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.