A Company That Has Been Lining The Pockets Of Its Shareholders For Years

| About: Ocwen Financial (OCN)

Shareholders are a pain to some CEOs. They are always asking for profits and returns for their stake in the company. Some CEOs resent that. They want time - usually two years - to show what geniuses they have really been for the last five years despite their seemingly dismal results.

Patience, they plead.

Forbes magazine summed up the attitude well earlier this year, when one of its columnists, Keld Jensen, said if he ever became a CEO, he would send out the following letter:

I don't care what the share value will be for the next two years. We might not make a profit during this period. But we are going to focus all our resources on product research and development with the goal to create the best product the world has ever seen. We're here to change the world!

I'm sure Mr. Jensen is a very nice person and he probably likes puppy dogs. But if I ever see his name on the masthead of a company I happen to own - however small my piece - I am going to sell straight away.

I will not pass Go. I will not wait to collect $200. Sell. Sell. Sell.

As a shareholder, the only world I want a manager to change is mine - the owner. If a CEO wants to work in an environment where he can do anything he wants and no one will notice for two years, I suggest he get a job running the Department of Energy. Until then, I like companies with CEOs who remember who runs the company. And who owns it. And how never the twain shall meet.

Google (NASDAQ:GOOG) is one place with a lot of folks who scorn the 'let's make money for the shareholders' idea. And their share prices show it. Same with Wal-Mart (NYSE:WMT): They used to be on a mission to charge low prices to create high profits.Then six years ago, someone decided they needed to start squeezing the carbon out of Wal-Mart's supply chain. They also squeezed out profits.

At Ocwen Financial (NYSE:OCN), you won't find any executives talking such silly stuff. And their prices show it too. So much so, OCN is today the #1 rated stock in my Best Stocks Now app.

I have owned and talked about Ocwen many times over the last several years. Ocwen provides residential and commercial mortgage loans servicing as well as asset management services. And OCN has been growing its earnings over the last five years by 35% per year!

Data from Best Stocks Now App


Over the last ten years, OCN has delivered 35% per year while the market has delivered 5% to investors. Over the last five years, OCN has delivered 67% per year while the market has delivered 6%. Over the last three years, OCN has delivered 82% per year while the market has delivered only 15% during the same time.

And over the last 12 months, OCN is up 117% with the market up 18%.

Data from Best Stocks Now App

And who has been putting their name on this stock for years? That's right-you can google my name and find all of the articles I have written and the radio minutes I have recorded about OCN. You can even take a look at my newsletter and see where the stock has been in my portfolios overtime.

OCN has great performance in earnings and profits and sales. And that is all about management knowing it has to take care of business for its customers - and shareholders. Today, I give them a performance and momentum grade of A+!


But what about value? OCN is currently trading at ten times forward earnings. It is expected to grow those earnings by 25% per year over the next five years. OCN also has a very favorable PEG ratio of 0.39.

Data from Best Stocks Now App

Now we need to apply an appropriate multiple to those earnings to project a five-year target price. This is the hardest part of the equation. There are no set rules to go by here. Instead we must weigh the following factors in determining the multiple:

  1. The current forward average PE ratio of the 3,600 stocks that I track is 18.4
  2. The current forward PE ratio of OCN is 9.81.

I next apply a very conservative multiple towards the potential future earnings of the shares. When I do this I get a five-year target price of $105 per share. The stock passes both my valuation and performance tests.

Stock chart

Is it too much to ask that a stock have a good chart on top of good performance and valuation? This is my final test. I want the best management, the best performance. I want to buy the stock at a reasonable price. And lastly, I want a good, healthy, stock chart. This is all I ask. The problem is, these requirements really narrows down the pickings. In fact, they narrow them down to only about 220 stocks out of the almost 3,600 stocks I follow.

So for all these people looking for stocks in companies that do not seek to relentlessly improve profits and shareholder value: Good news: You have a lot to choose from. The other 3,380 stocks that do not get my top ratings.

Take a look at OCN's one year chart; OCN has been in an uptrend as it recently broke out of a sideways trend. It's also currently hitting new, all-time highs. OCN was a $2 stock in 2008 and it is a $56 stock today, and I think it can go higher! It is a stock that I own at Gunderson Capital Management. And I fully expect to own it two years from now as well.

Data from Best Stocks Now App

Disclosure: I am long OCN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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