In this article we are going to use hedge fund sentiment as a tool and determine whether Dynatronics Corporation (NASDAQ:DYNT) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Dynatronics Corporation (NASDAQ:DYNT) a splendid investment now? Investors who are in the know were in a bullish mood. The number of bullish hedge fund positions went up by 2 in recent months. Dynatronics Corporation (NASDAQ:DYNT) was in 3 hedge funds’ portfolios at the end of September. The all time high for this statistics is 3. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DYNT isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website.Keeping this in mind we’re going to take a look at the fresh hedge fund action regarding Dynatronics Corporation (NASDAQ:DYNT).
How are hedge funds trading Dynatronics Corporation (NASDAQ:DYNT)?
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 200% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards DYNT over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Dynatronics Corporation (NASDAQ:DYNT), with a stake worth $0.3 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $0 million. Two Sigma Advisors 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 Renaissance Technologies allocated the biggest weight to Dynatronics Corporation (NASDAQ:DYNT), around 0.0003% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, earmarking 0 percent of its 13F equity portfolio to DYNT.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, created the largest position in Dynatronics Corporation (NASDAQ:DYNT). Citadel Investment Group had $0 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $0 million investment in the stock during the quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Dynatronics Corporation (NASDAQ:DYNT). We will take a look at InnSuites Hospitality Trust (NYSE:IHT), Mexco Energy Corporation (NYSE:MXC), LM Funding America, Inc. (NASDAQ:LMFA), Rexahn Pharmaceuticals, Inc. (NASDAQ:REXN), Marin Software Inc (NYSE:MRIN), Synthetic Biologics Inc (NYSE:SYN), and Tengasco, Inc. (NYSE:TGC). All of these stocks’ market caps are similar to DYNT’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.4 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $0 million in DYNT’s case. LM Funding America, Inc. (NASDAQ:LMFA) is the most popular stock in this table. On the other hand InnSuites Hospitality Trust (NYSE:IHT) is the least popular one with only 1 bullish hedge fund positions. Dynatronics Corporation (NASDAQ:DYNT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DYNT is 87. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and beat the market again by 15.4 percentage points. Unfortunately DYNT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DYNT were disappointed as the stock returned -5.7% since the end of September (through 11/23) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.