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Denison Mines Corp (DNN): Hedge Funds In Wait-and-See Mode

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Denison Mines Corp (NYSE:DNN).

Denison Mines Corp (NYSE:DNN) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of the first quarter of 2020. At the end of this article we will also compare DNN to other stocks including RADA Electronic Industries Ltd. (NASDAQ:RADA), Regional Management Corp (NYSE:RM), and The Joint Corp. (NASDAQ:JYNT) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 51 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the key hedge fund action encompassing Denison Mines Corp (NYSE:DNN).

How have hedgies been trading Denison Mines Corp (NYSE:DNN)?

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2019. On the other hand, there were a total of 4 hedge funds with a bullish position in DNN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Falcon Edge Capital, managed by Richard Gerson and Navroz D. Udwadia, holds the most valuable position in Denison Mines Corp (NYSE:DNN). Falcon Edge Capital has a $1.6 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Sprott Asset Management, led by Eric Sprott, holding a $0.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions include Robert Richards’s Heathbridge Capital Management, Ken Griffin’s Citadel Investment Group and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Falcon Edge Capital allocated the biggest weight to Denison Mines Corp (NYSE:DNN), around 0.17% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to DNN.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s also examine hedge fund activity in other stocks similar to Denison Mines Corp (NYSE:DNN). We will take a look at RADA Electronic Industries Ltd. (NASDAQ:RADA), Regional Management Corp (NYSE:RM), The Joint Corp. (NASDAQ:JYNT), and Washington Prime Group Inc. (NYSE:WPG). This group of stocks’ market valuations match DNN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RADA 6 7927 3
RM 11 41732 -1
JYNT 15 43985 0
WPG 9 2080 0
Average 10.25 23931 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $2 million in DNN’s case. The Joint Corp. (NASDAQ:JYNT) is the most popular stock in this table. On the other hand RADA Electronic Industries Ltd. (NASDAQ:RADA) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Denison Mines Corp (NYSE:DNN) is even less popular than RADA. Hedge funds clearly dropped the ball on DNN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on DNN as the stock returned 67.3% so far in the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.