According to a Schedule 13G filing with the SEC, Andrew Redleaf’s Whitebox Advisors disclosed raising its stake in Ocwen Financial Corp. (NYSE:OCN) to 7.67 million shares, equal to 6.12% of the company’s outstanding stock. This yields an increase of 2.28 million shares in the fund’s position size since it revealed its most recent 13F filing with the U.S. Securities and Exchange Commission for the second quarter.
Andy Redleaf of Whitebox Advisors
Whitebox Advisors is an employee-owned hedge fund established by Andrew Redleaf in 2000. The investment firm employs a mix of quantitative and qualitative analysis to make its investments and manage its portfolios. Andrew Redleaf is an exceptionally smart lad, as he managed to earn “magna cum laude” Bachelor and Master’s degrees in mathematics at Yale University in just three years. Furthermore, he was honored with the mathematics prize as the top undergraduate in the field. Andrew Redleaf started his investment career as a trader for Gruntal Securities, where he used his math skills to his advantage. Then, he had also worked as a market maker on the Chicago Board Options Exchange and as a portfolio manager at Deephaven Market Neutral Fund prior to launching his own firm. According to its most recent 13F filing, Whitebox Advisors manages a diversified equity portfolio with a value of $2.31 billion as of June 30, of which the largest portion of roughly 26% is held in financial stocks.
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Ocwen Financial Corp. (NYSE:OCN) is a financial services holding company that engages in the servicing and origination of mortgage loans. The company provides solutions that assist homeowners in making their loans worth more by using its proprietary technology, global infrastructure and superior training and processes. The shares of Ocwen plunged by over 46% since the beginning of the current year, partly owing to a weak financial performance.
It seems that Ocwen Financial has a hard time recovering from the backdated letters sent to homeowners regarding loan modification and other issues in 2014. The company unintentionally sent improperly dated letters to some borrowers due to software errors in its correspondence systems. In some cases, borrowers facing foreclosure received letters with so-called ‘cure dates’ that were months prior to Ocwen’s letters. Just recently, the analysts from Bank of America Merrill Lynch downgraded Ocwen to ‘Underperform’ from ‘Neutral’ and cut the price target to $9.00 per share. Ocwen Financial has recently launched a cost improvement effort and aims at reducing its costs by over $150 million. However, BofA Merill Lynch believes that the cost reduction strategy is not enough in order for the company to be profitable in the upcoming years. In addition to that, the analyst asserted that Ocwen Financial will deliver GAAP EPS losses over the next quarters, mainly caused by a combination of asset sales, run-off and elevated operational expenditures.
On July 30, Ocwen Financial posted its financial results for the second quarter of the current year, which has put strong downward pressure on the company’s stock. The company delivered a net income of $10 million, or $0.08 per share, compared to $67 million, or $0.48 per share, reported a year ago. In addition, Ocwen’s revenue declined by 16% on the year to $463 million. The company’s income from operations disappointed investors as well, dropping to $111 million, compared to $208 million a year ago.
However, despite numerous downgrades and lower-than-expected financial results seen by Ocwen Financial lately, Andrew Redleaf seems to be betting on the company’s turnaround. In addition, Michael Blitzer’s Kingstown Capital Management is by far the largest shareholder in Ocwen Financial Corp. (NYSE:OCN) within our database, holding a stake of 12 million shares as of the end of March.
Disclosure: None
