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Hedge Funds Aren’t Crazy About Denny’s Corporation (DENN) Anymore – Ruby Tuesday, Inc. (RT), CEC Entertainment, Inc. (CEC)

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Is Denny’s Corporation (NASDAQ:DENN) going to take off soon? Hedge funds are selling. The number of bullish hedge fund positions went down by 2 lately.

Denny's Corporation (NASDAQ:DENN)

To most stock holders, hedge funds are assumed to be worthless, old financial tools of yesteryear. While there are more than 8000 funds trading at the moment, we hone in on the moguls of this group, around 450 funds. It is widely believed that this group oversees most of the hedge fund industry’s total capital, and by monitoring their top stock picks, we have spotted a few investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Just as integral, bullish insider trading sentiment is another way to break down the world of equities. Just as you’d expect, there are many motivations for an executive to get rid of shares of his or her company, but only one, very clear reason why they would buy. Various academic studies have demonstrated the market-beating potential of this strategy if piggybackers know what to do (learn more here).

Keeping this in mind, let’s take a look at the key action encompassing Denny’s Corporation (NASDAQ:DENN).

How are hedge funds trading Denny’s Corporation (NASDAQ:DENN)?

At year’s end, a total of 9 of the hedge funds we track held long positions in this stock, a change of -18% 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 upping their stakes considerably.

Of the funds we track, McKinley Capital Management, managed by Robert B. Gillam, holds the biggest position in Denny’s Corporation (NASDAQ:DENN). McKinley Capital Management has a $4.9 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is GAMCO Investors, managed by Mario Gabelli, which held a $3.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Andy Redleaf’s Whitebox Advisors, Cliff Asness’s AQR Capital Management and Joel Greenblatt’s Gotham Asset Management.

Due to the fact that Denny’s Corporation (NASDAQ:DENN) has experienced a declination in interest from hedge fund managers, logic holds that there lies a certain “tier” of fund managers that decided to sell off their entire stakes heading into 2013. It’s worth mentioning that Brett Hendrickson’s Nokomis Capital dumped the biggest stake of the 450+ funds we track, worth an estimated $1.8 million in stock., and Joseph Vidich of Manalapan Oracle Capital Management was right behind this move, as the fund dropped about $0.7 million worth. These moves are important to note, as aggregate hedge fund interest fell by 2 funds heading into 2013.

How are insiders trading Denny’s Corporation (NASDAQ:DENN)?

Insider buying is most useful when the company in focus has seen transactions within the past six months. Over the latest 180-day time period, Denny’s Corporation (NASDAQ:DENN) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Denny’s Corporation (NASDAQ:DENN). These stocks are Fiesta Restaurant Group Inc (NASDAQ:FRGI), Ruby Tuesday, Inc. (NYSE:RT), CEC Entertainment, Inc. (NYSE:CEC), Chuy’s Holdings Inc (NASDAQ:CHUY), and Biglari Holdings Inc (NYSE:BH). This group of stocks belong to the restaurants industry and their market caps are closest to DENN’s market cap.

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