Hedge Funds Are Warming Up To Aytu BioScience, Inc. (AYTU)

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Aytu BioScience, Inc. (NASDAQ:AYTU).

Is Aytu BioScience, Inc. (NASDAQ:AYTU) a buy here? Prominent investors are in an optimistic mood. The number of bullish hedge fund positions moved up by 1 in recent months. Our calculations also showed that AYTU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). AYTU was in 3 hedge funds’ portfolios at the end of the third quarter of 2019. There were 2 hedge funds in our database with AYTU holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most stock holders, hedge funds are seen as slow, old investment tools of yesteryear. While there are over 8000 funds in operation at present, We choose to focus on the masters of this group, around 750 funds. These investment experts manage the lion’s share of the hedge fund industry’s total asset base, and by watching their highest performing equity investments, Insider Monkey has formulated many investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .


Ken Griffin of Citadel Investment Group

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a look at the recent hedge fund action regarding Aytu BioScience, Inc. (NASDAQ:AYTU).

What does smart money think about Aytu BioScience, Inc. (NASDAQ:AYTU)?

At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AYTU over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Armistice Capital held the most valuable stake in Aytu BioScience, Inc. (NASDAQ:AYTU), which was worth $6.2 million at the end of the third quarter. On the second spot was Wexford Capital which amassed $0.1 million worth of shares. Citadel Investment Group was 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 Armistice Capital allocated the biggest weight to Aytu BioScience, Inc. (NASDAQ:AYTU), around 0.41% of its 13F portfolio. Wexford Capital is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to AYTU.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into Aytu BioScience, Inc. (NASDAQ:AYTU) headfirst. Citadel Investment Group, managed by Ken Griffin, established the most valuable position in Aytu BioScience, Inc. (NASDAQ:AYTU). Citadel Investment Group had $0 million invested in the company at the end of the quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Aytu BioScience, Inc. (NASDAQ:AYTU) but similarly valued. These stocks are Kirkland’s, Inc. (NASDAQ:KIRK), Boxlight Corporation (NASDAQ:BOXL), ZK International Group Co., Ltd. (NASDAQ:ZKIN), and Diversified Restaurant Holdings, Inc. (NASDAQ:SAUC). All of these stocks’ market caps are similar to AYTU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KIRK 11 5251 1
BOXL 1 19 0
ZKIN 1 496 0
SAUC 2 641 -2
Average 3.75 1602 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.75 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $6 million in AYTU’s case. Kirkland’s, Inc. (NASDAQ:KIRK) is the most popular stock in this table. On the other hand Boxlight Corporation (NASDAQ:BOXL) is the least popular one with only 1 bullish hedge fund positions. Aytu BioScience, Inc. (NASDAQ:AYTU) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AYTU wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AYTU investors were disappointed as the stock returned -30.6% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

Disclosure: None. This article was originally published at Insider Monkey.