At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Denny’s Corporation (NASDAQ:DENN) makes for a good investment right now.
Denny’s Corporation (NASDAQ:DENN) was in 20 hedge funds’ portfolios at the end of the third quarter of 2019. DENN investors should be aware of an increase in enthusiasm from smart money in recent months. There were 17 hedge funds in our database with DENN holdings at the end of the previous quarter. Our calculations also showed that DENN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most stock holders, hedge funds are seen as unimportant, outdated financial tools of years past. While there are greater than 8000 funds trading today, Our researchers hone in on the elite of this group, approximately 750 funds. It is estimated that this group of investors control the majority of the smart money’s total capital, and by monitoring their highest performing equity investments, Insider Monkey has determined several investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Bruce Kovner of Caxton Associates
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s take a look at the new hedge fund action surrounding Denny’s Corporation (NASDAQ:DENN).
What have hedge funds been doing with Denny’s Corporation (NASDAQ:DENN)?
Heading into the fourth quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in DENN over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Denny’s Corporation (NASDAQ:DENN) was held by Renaissance Technologies, which reported holding $82.7 million worth of stock at the end of September. It was followed by Cardinal Capital with a $52.1 million position. Other investors bullish on the company included Arrowstreet Capital, Millennium Management, and Maverick Capital. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to Denny’s Corporation (NASDAQ:DENN), around 1.72% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.4 percent of its 13F equity portfolio to DENN.
As aggregate interest increased, key hedge funds were breaking ground themselves. Maverick Capital, managed by Lee Ainslie, assembled the biggest position in Denny’s Corporation (NASDAQ:DENN). Maverick Capital had $5.7 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also made a $1.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Brandon Haley’s Holocene Advisors, Joel Greenblatt’s Gotham Asset Management, and Bruce Kovner’s Caxton Associates.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Denny’s Corporation (NASDAQ:DENN) but similarly valued. These stocks are Oceaneering International, Inc. (NYSE:OII), Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), Ping Identity Holding Corp. (NYSE:PING), and Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL). This group of stocks’ market valuations are similar to DENN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OII | 19 | 191225 | 4 |
| IRWD | 22 | 249690 | 1 |
| PING | 18 | 70018 | 18 |
| MDGL | 12 | 264363 | 0 |
| Average | 17.75 | 193824 | 5.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was $221 million in DENN’s case. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is the most popular stock in this table. On the other hand Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) is the least popular one with only 12 bullish hedge fund positions. Denny’s Corporation (NASDAQ:DENN) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately DENN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DENN were disappointed as the stock returned -14.2% during the fourth quarter (through the end of November) 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.
