Denbury Resources Inc. (DNR): Insiders Are Buying, Should You?

Is Denbury Resources Inc. (NYSE:DNR) a buy here? Money managers are in a bullish mood. The number of bullish hedge fund bets increased by 1 in recent months.

According to most investors, hedge funds are seen as underperforming, outdated investment vehicles of years past. While there are more than 8000 funds trading at present, we at Insider Monkey choose to focus on the crème de la crème of this group, around 450 funds. Most estimates calculate that this group controls the lion’s share of the hedge fund industry’s total asset base, and by watching their best equity investments, we have unearthed a number of investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Just as important, bullish insider trading activity is a second way to break down the marketplace. As the old adage goes: there are many incentives for an insider to get rid of shares of his or her company, but just one, very obvious reason why they would behave bullishly. Plenty of academic studies have demonstrated the useful potential of this strategy if “monkeys” know where to look (learn more here).

Keeping this in mind, we’re going to take a peek at the latest action encompassing Denbury Resources Inc. (NYSE:DNR).

What have hedge funds been doing with Denbury Resources Inc. (NYSE:DNR)?

At Q1’s end, a total of 19 of the hedge funds we track were long in this stock, a change of 6% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings meaningfully.

Of the funds we track, Omega Advisors, managed by Leon Cooperman, holds the largest position in Denbury Resources Inc. (NYSE:DNR). Omega Advisors has a $78.3 million position in the stock, comprising 1.2% of its 13F portfolio. The second largest stake is held by Diamond Hill Capital, managed by Ric Dillon, which held a $20.4 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include D. E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John Overdeck and David Siegel’s Two Sigma Advisors.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the biggest position in Denbury Resources Inc. (NYSE:DNR). Arrowstreet Capital had 11.1 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $6.3 million position during the quarter. The following funds were also among the new DNR investors: George Soros’s Soros Fund Management and Ken Griffin’s Citadel Investment Group.

What do corporate executives and insiders think about Denbury Resources Inc. (NYSE:DNR)?

Bullish insider trading is best served when the company in focus has seen transactions within the past six months. Over the latest 180-day time period, Denbury Resources Inc. (NYSE:DNR) has experienced 6 unique insiders buying, and 6 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Denbury Resources Inc. (NYSE:DNR). These stocks are National Fuel Gas Co. (NYSE:NFG), Baytex Energy Corp (USA) (NYSE:BTE), Linn Energy LLC (NASDAQ:LINE), Plains Exploration & Production Company (NYSE:PXP), and Cimarex Energy Co (NYSE:XEC). This group of stocks belong to the independent oil & gas industry and their market caps are closest to DNR’s market cap.

With the returns shown by Insider Monkey’s research, retail investors must always monitor hedge fund and insider trading activity, and Denbury Resources Inc. (NYSE:DNR) is an important part of this process.

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