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Is Aptose Biosciences Inc (APTO) A Good Stock To Buy?

In this article you are going to find out whether hedge funds think Aptose Biosciences Inc (NASDAQ:APTO) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Aptose Biosciences Inc (NASDAQ:APTO) a splendid investment now? The smart money is in a pessimistic mood. The number of bullish hedge fund positions decreased by 4 lately. Our calculations also showed that APTO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are plenty of formulas market participants employ to analyze stocks. A pair of the most underrated formulas are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the best fund managers can outperform their index-focused peers by a significant amount (see the details here).

GOTHAM ASSET MANAGEMENT

Joel Greenblatt of Gotham Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the recent hedge fund action regarding Aptose Biosciences Inc (NASDAQ:APTO).

What does smart money think about Aptose Biosciences Inc (NASDAQ:APTO)?

At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the fourth quarter of 2019. By comparison, 3 hedge funds held shares or bullish call options in APTO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management has the most valuable position in Aptose Biosciences Inc (NASDAQ:APTO), worth close to $37.4 million, amounting to 1.4% of its total 13F portfolio. The second most bullish fund manager is Mitchell Blutt of Consonance Capital Management, with a $34.4 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions contain James A. Silverman’s Opaleye Management, Brian Ashford-Russell and Tim Woolley’s Polar Capital and Mark Hart III’s Corriente Advisors. In terms of the portfolio weights assigned to each position Corriente Advisors allocated the biggest weight to Aptose Biosciences Inc (NASDAQ:APTO), around 18.71% of its 13F portfolio. Opaleye Management is also relatively very bullish on the stock, dishing out 6.33 percent of its 13F equity portfolio to APTO.

Seeing as Aptose Biosciences Inc (NASDAQ:APTO) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few money managers that elected to cut their full holdings last quarter. Interestingly, Neil Shahrestani’s Ikarian Capital sold off the largest position of the 750 funds followed by Insider Monkey, comprising an estimated $5.7 million in stock. Richard Driehaus’s fund, Driehaus Capital, also dumped its stock, about $5.5 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 4 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Aptose Biosciences Inc (NASDAQ:APTO). These stocks are Orion Engineered Carbons SA (NYSE:OEC), GTT Communications Inc (NYSE:GTT), BioXcel Therapeutics, Inc. (NASDAQ:BTAI), and Urstadt Biddle Properties Inc. (NYSE:UBP). This group of stocks’ market valuations are similar to APTO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OEC 21 104910 3
GTT 10 145022 -8
BTAI 10 35609 7
UBP 1 979 0
Average 10.5 71630 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $155 million in APTO’s case. Orion Engineered Carbons SA (NYSE:OEC) is the most popular stock in this table. On the other hand Urstadt Biddle Properties Inc. (NYSE:UBP) is the least popular one with only 1 bullish hedge fund positions. Aptose Biosciences Inc (NASDAQ:APTO) is not the most popular stock in this group but hedge fund interest is still above average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately APTO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on APTO were disappointed as the stock returned 11.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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