Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Is Denny’s Corporation (NASDAQ:DENN) a buy, sell, or hold? Hedge funds are taking a bearish view. The number of long hedge fund bets decreased by 3 recently. Our calculations also showed that DENN isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s go over the fresh hedge fund action encompassing Denny’s Corporation (NASDAQ:DENN).
How have hedgies been trading Denny’s Corporation (NASDAQ:DENN)?
Heading into the first quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DENN over the last 14 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in Denny’s Corporation (NASDAQ:DENN) was held by Renaissance Technologies, which reported holding $60.9 million worth of stock at the end of December. It was followed by Cardinal Capital with a $54.2 million position. Other investors bullish on the company included Arrowstreet Capital, Millennium Management, and Beddow Capital Management.
Judging by the fact that Denny’s Corporation (NASDAQ:DENN) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of money managers that slashed their full holdings last quarter. Interestingly, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors dropped the largest investment of the 700 funds monitored by Insider Monkey, valued at close to $0.5 million in stock, and Joel Greenblatt’s Gotham Asset Management was right behind this move, as the fund said goodbye to about $0.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 3 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Denny’s Corporation (NASDAQ:DENN). These stocks are Radware Ltd. (NASDAQ:RDWR), Pacific Drilling SA (NYSE:PACD), Five Point Holdings, LLC (NYSE:FPH), and Insmed Incorporated (NASDAQ:INSM). All of these stocks’ market caps are similar to DENN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RDWR | 18 | 301130 | 2 |
| PACD | 6 | 710151 | 6 |
| FPH | 16 | 242436 | 4 |
| INSM | 16 | 196322 | -1 |
| Average | 14 | 362510 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $363 million. That figure was $164 million in DENN’s case. Radware Ltd. (NASDAQ:RDWR) is the most popular stock in this table. On the other hand Pacific Drilling SA (NYSE:PACD) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Denny’s Corporation (NASDAQ:DENN) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately DENN wasn’t nearly as popular as these 15 stock and hedge funds that were betting on DENN were disappointed as the stock returned 8.2% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
