How Ocwen Financial Beat Wall Street

 

 

Thursday was another day of high volatility on Wall Street, with the major indices declining further. The NASDAQ Composite (^IXIC) led the way by shedding 1.48% and closing at 4,570.82.

It wasn’t all doom on the NASDAQ, however, as Ocwen Financial (OCN) bucked the downtrend by soaring more than 11% on sharply higher volume.

Shares of the Atlanta-based mortgage loan originator and servicer closed the trading day at $7.77, an increase of $0.77 over Wednesday’s close.

Trading volume for the troubled finance company was heavy, with more than 22.7 million shares exchanging hands. Compare that to the company’s 30-day average trading volume of roughly 5.5 million shares.

Igniting the rally in Ocwen shares was news that hedge fund manager Robert Chapman started buying OCN shares and call options late Tuesday. The hedge fund increased its position on Wednesday.

As you can see from the chart below, shares of OCN have been steadily declining for the last three years… but the descent accelerated recently based on significant regulatory concerns about the nation’s largest servicer of delinquent mortgages.

The company ran afoul of regulators in New York state over its business practices, which ultimately led to the resignation of its Co-Founder and CEO, Bill Erbey.

On top of that, investors received news this week that California wants to suspend the company’s mortgage license because it didn’t produce documents proving its compliance with California foreclosure law.

Incredibly, in a statement to Bloomberg
, Chapman asserted his belief that “Ocwen could easily double in price from here.”

And frankly, that’s a bold statement for a company whose financial performance is being hurt by ongoing compliance troubles.

Q3 2014 Financial Results…

The company’s Q3 2014 report showed some areas of strength, while also showing significant weakness in others.