Hedge Funds Are Selling Mr. Cooper Group Inc. (COOP)

In this article we are going to use hedge fund sentiment as a tool and determine whether Mr. Cooper Group Inc. (NASDAQ:COOP) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Mr. Cooper Group Inc. (NASDAQ:COOP) has seen a decrease in hedge fund interest lately. Mr. Cooper Group Inc. (NASDAQ:COOP) was in 27 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 34. Our calculations also showed that COOP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now let’s view the recent hedge fund action regarding Mr. Cooper Group Inc. (NASDAQ:COOP).

Howard Marks of Oaktree Capital Management

Do Hedge Funds Think COOP Is A Good Stock To Buy Now?

At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards COOP over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Omega Advisors was the largest shareholder of Mr. Cooper Group Inc. (NASDAQ:COOP), with a stake worth $174.9 million reported as of the end of September. Trailing Omega Advisors was HG Vora Capital Management, which amassed a stake valued at $168.8 million. Oaktree Capital Management, Inherent Group, and OCO Capital Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position OCO Capital Partners allocated the biggest weight to Mr. Cooper Group Inc. (NASDAQ:COOP), around 28.2% of its 13F portfolio. Nierenberg Investment Management is also relatively very bullish on the stock, dishing out 24.49 percent of its 13F equity portfolio to COOP.

Seeing as Mr. Cooper Group Inc. (NASDAQ:COOP) has faced declining sentiment from the smart money, it’s easy to see that there is a sect of hedgies that decided to sell off their full holdings heading into Q4. Intriguingly, Matthew Stadelman’s Diamond Hill Capital dumped the biggest position of the “upper crust” of funds followed by Insider Monkey, worth about $97.2 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund cut about $5.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Mr. Cooper Group Inc. (NASDAQ:COOP). We will take a look at Mantech International Corp (NASDAQ:MANT), Mercury General Corporation (NYSE:MCY), Independent Bank Group Inc (NASDAQ:IBTX), Silvergate Capital Corporation (NYSE:SI), CryoPort, Inc. (NASDAQ:CYRX), Blend Labs Inc. (NYSE:BLND), and Axos Financial, Inc. (NYSE:AX). This group of stocks’ market values are closest to COOP’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $203 million. That figure was $671 million in COOP’s case. Silvergate Capital Corporation (NYSE:SI) is the most popular stock in this table. On the other hand Independent Bank Group Inc (NASDAQ:IBTX) is the least popular one with only 6 bullish hedge fund positions. Mr. Cooper Group Inc. (NASDAQ:COOP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for COOP is 68.2. 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately COOP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on COOP were disappointed as the stock returned 0.7% since the end of September (through 12/9) 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.