Is OTIC A Good Stock To Buy Now?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Otonomy Inc (NASDAQ:OTIC).

Is OTIC a good stock to buy now? Otonomy Inc (NASDAQ:OTIC) shareholders have witnessed an increase in enthusiasm from smart money in recent months. Otonomy Inc (NASDAQ:OTIC) was in 16 hedge funds’ portfolios at the end of September. The all time high for this statistic is 17. Our calculations also showed that OTIC 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.

Today there are dozens of indicators market participants use to appraise publicly traded companies. Some of the best indicators are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can outclass the S&P 500 by a significant amount (see the details here).

Phillip Gross of Adage Capital

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 15 best blue chip stocks 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. Now let’s take a look at the recent hedge fund action regarding Otonomy Inc (NASDAQ:OTIC).

Do Hedge Funds Think OTIC Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in OTIC a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, OrbiMed Advisors has the largest position in Otonomy Inc (NASDAQ:OTIC), worth close to $13.2 million, comprising 0.2% of its total 13F portfolio. The second most bullish fund manager is Cormorant Asset Management, managed by Bihua Chen, which holds a $13.1 million position; 0.5% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish include Steve Cohen’s Point72 Asset Management, Efrem Kamen’s Pura Vida Investments and Renaissance Technologies. In terms of the portfolio weights assigned to each position DAFNA Capital Management allocated the biggest weight to Otonomy Inc (NASDAQ:OTIC), around 0.91% of its 13F portfolio. Cormorant Asset Management is also relatively very bullish on the stock, setting aside 0.5 percent of its 13F equity portfolio to OTIC.

As aggregate interest increased, specific money managers have been driving this bullishness. OrbiMed Advisors, assembled the most valuable position in Otonomy Inc (NASDAQ:OTIC). OrbiMed Advisors had $13.2 million invested in the company at the end of the quarter. Bihua Chen’s Cormorant Asset Management also initiated a $13.1 million position during the quarter. The following funds were also among the new OTIC investors: Phill Gross and Robert Atchinson’s Adage Capital Management and Aaron Cowen’s Suvretta Capital Management.

Let’s now review hedge fund activity in other stocks similar to Otonomy Inc (NASDAQ:OTIC). We will take a look at Heat Biologics, Inc. (NASDAQ:HTBX), Vuzix Corporation (NASDAQ:VUZI), Mereo BioPharma Group plc (NASDAQ:MREO), Axovant Gene Therapies Ltd. (NASDAQ:AXGT), BRT Apartments Corp (NYSE:BRT), Spirit of Texas Bancshares, Inc. (NASDAQ:STXB), and Flotek Industries Inc (NYSE:FTK). All of these stocks’ market caps match OTIC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $76 million in OTIC’s case. Axovant Gene Therapies Ltd. (NASDAQ:AXGT) is the most popular stock in this table. On the other hand Heat Biologics, Inc. (NASDAQ:HTBX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Otonomy Inc (NASDAQ:OTIC) is more popular among hedge funds. Our overall hedge fund sentiment score for OTIC is 87.2. 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. 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 returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on OTIC as the stock returned 32.6% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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