The worries about the economic slowdown in China and the ongoing uncertainty about the path of interest rate increases triggered a rash of equity sell-offs during the third quarter. Of course, most hedge funds and other asset managers had to stomach substantial losses during the bloody three-month period, which might have caused some to consider fleeing the U.S equity markets. Interestingly, smaller-cap stocks registered higher losses than large-capitalization stocks during the September quarter, suggesting that institutional investors heavily discarded seemingly riskier equities amid high uncertainty and turmoil. In fact, the Russell 2000 Index lost 11.9% in the third quarter, while the Standard and Poor’s 500 benchmark declined by 6.4%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Otonomy Inc (NASDAQ:OTIC) during this turbulent period.
Otonomy Inc (NASDAQ:OTIC) has experienced an increase in hedge fund sentiment in recent months, being included in the portfolios of 14 hedge funds that we track. At the end of this article we will also compare OTIC to other stocks including Newpark Resources Inc (NYSE:NR), BreitBurn Energy Partners L.P. (NASDAQ:BBEP), and Medley Capital Corp (NYSE:MCC) to get a better sense of its popularity.
At the moment there are several formulas shareholders put to use to grade stocks. Some of the most useful formulas are hedge fund and insider trading indicators. Experts at Insider Monkey, a website specializing in hedge funds, have shown that, historically, those who follow the top picks of the elite investment managers can outclass the S&P 500 by a very impressive amount (see the details here).
Now, let’s review the key action surrounding Otonomy Inc (NASDAQ:OTIC).
Hedge fund activity in Otonomy Inc (NASDAQ:OTIC)
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long in this stock, 8% higher than the previous quarter. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings substantially.
Of the funds tracked by Insider Monkey, OrbiMed Advisors, managed by Samuel Isaly, holds the biggest position in Otonomy Inc (NASDAQ:OTIC). OrbiMed Advisors has a $40.2 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting in the number two spot is Highland Capital Management, managed by James Dondero, which holds an $8.8 million position; 0.3% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism encompass Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, Charles Clough’s Clough Capital Partners, and Ken Griffin’s Citadel Investment Group.
Consequently, key hedge funds have jumped into Otonomy Inc (NASDAQ:OTIC) headfirst. Ascend Capital, managed by Malcolm Fairbairn, created the most valuable position in Otonomy Inc (NASDAQ:OTIC). Ascend Capital has $2.1 million invested in the company as of the end of the quarter. Mark Kingdon’s Kingdon Capital also made a $2 million investment in the stock during the quarter. The following funds were also among the new OTIC investors: Clifford Fox’s Columbus Circle Investors, Israel Englander’s Millennium Management, and Steve Cohen’s Point72 Asset Management.
Let’s also take a look at hedge fund activity in other stocks similar to Otonomy Inc (NASDAQ:OTIC). We will take a look at Newpark Resources Inc (NYSE:NR), BreitBurn Energy Partners L.P. (NASDAQ:BBEP), Medley Capital Corp (NYSE:MCC), and Centrue Financial Corp (PINK:TRUE). This group of stocks’ market values match OTIC’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of eight hedge funds with bullish positions and the average amount invested in these stocks was $27 million, far below the $74 million invested in Otonomy by the same money managers. Newpark Resources Inc (NYSE:NR) is the most popular stock in this table. On the other hand Medley Capital Corp (NYSE:MCC) is the least popular one with only four bullish hedge fund positions. Compared to these stocks Otonomy Inc (NASDAQ:OTIC) is more popular among hedge funds. Considering that hedge funds are fond of this stock for its market cap, owning 17.20% of its shares, it may be a good idea to analyze it in detail and potentially include it in your portfolio.