We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Denbury Inc. (NYSE:DEN).
Is Denbury Inc. (NYSE:DEN) undervalued? The best stock pickers were betting on the stock. The number of bullish hedge fund bets moved up by 9 in recent months. Denbury Inc. (NYSE:DEN) was in 30 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DEN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 21 hedge funds in our database with DEN holdings at the end of December.
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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a peek at the latest hedge fund action encompassing Denbury Inc. (NYSE:DEN).
Do Hedge Funds Think DEN Is A Good Stock To Buy Now?
At Q1’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 43% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards DEN over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Silver Point Capital held the most valuable stake in Denbury Inc. (NYSE:DEN), which was worth $201.4 million at the end of the fourth quarter. On the second spot was Cyrus Capital Partners which amassed $127.7 million worth of shares. Hein Park Capital, GoldenTree Asset Management, and Encompass Capital Advisors were 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 Cyrus Capital Partners allocated the biggest weight to Denbury Inc. (NYSE:DEN), around 31.17% of its 13F portfolio. Silver Point Capital is also relatively very bullish on the stock, designating 21.24 percent of its 13F equity portfolio to DEN.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Silver Point Capital, managed by Edward A. Mule, established the largest position in Denbury Inc. (NYSE:DEN). Silver Point Capital had $201.4 million invested in the company at the end of the quarter. Rob Citrone’s Discovery Capital Management also initiated a $55.5 million position during the quarter. The other funds with brand new DEN positions are Michael A. Price and Amos Meron’s Empyrean Capital Partners, Paul Marshall and Ian Wace’s Marshall Wace LLP, and David Rosen’s Rubric Capital Management.
Let’s now review hedge fund activity in other stocks similar to Denbury Inc. (NYSE:DEN). We will take a look at Axonics Modulation Technologies, Inc. (NASDAQ:AXNX), Bloomin’ Brands Inc (NASDAQ:BLMN), Telecom Argentina S.A. (NYSE:TEO), Flagstar Bancorp Inc (NYSE:FBC), CryoPort, Inc. (NASDAQ:CYRX), Cubic Corporation (NYSE:CUB), and WSFS Financial Corporation (NASDAQ:WSFS). This group of stocks’ market valuations match DEN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AXNX | 16 | 289523 | -10 |
| BLMN | 32 | 498246 | 8 |
| TEO | 9 | 23425 | 3 |
| FBC | 28 | 276650 | 0 |
| CYRX | 20 | 129372 | -1 |
| CUB | 31 | 454987 | 18 |
| WSFS | 10 | 87691 | -3 |
| Average | 20.9 | 251413 | 2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $251 million. That figure was $998 million in DEN’s case. Bloomin’ Brands Inc (NASDAQ:BLMN) is the most popular stock in this table. On the other hand Telecom Argentina S.A. (NYSE:TEO) is the least popular one with only 9 bullish hedge fund positions. Denbury Inc. (NYSE:DEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DEN is 85.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Hedge funds were also right about betting on DEN as the stock returned 58% since the end of Q1 (through 7/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
