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Is Denbury Resources Inc. (DNR) Going to Burn These Hedge Funds?

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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Denbury Resources Inc. (NYSE:DNR).

Denbury Resources Inc. (NYSE:DNR) has experienced a decrease in hedge fund interest recently. DNR was in 8 hedge funds’ portfolios at the end of the first quarter of 2020. There were 12 hedge funds in our database with DNR positions at the end of the previous quarter. Our calculations also showed that DNR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Harding

David Harding of Winton Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the new hedge fund action regarding Denbury Resources Inc. (NYSE:DNR).

How are hedge funds trading Denbury Resources Inc. (NYSE:DNR)?

Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in DNR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Arrowstreet Capital held the most valuable stake in Denbury Resources Inc. (NYSE:DNR), which was worth $0.2 million at the end of the third quarter. On the second spot was Winton Capital Management which amassed $0.2 million worth of shares. Two Sigma Advisors, Citadel Investment Group, and Millennium Management 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 Winton Capital Management allocated the biggest weight to Denbury Resources Inc. (NYSE:DNR), around 0.0041% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.0006 percent of its 13F equity portfolio to DNR.

Judging by the fact that Denbury Resources Inc. (NYSE:DNR) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of hedge funds who sold off their entire stakes in the first quarter. At the top of the heap, George Soros’s Soros Fund Management cut the largest investment of all the hedgies monitored by Insider Monkey, comprising close to $8.1 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund dumped about $2.1 million worth. These transactions are important to note, as total hedge fund interest was cut by 4 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Denbury Resources Inc. (NYSE:DNR) but similarly valued. We will take a look at Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL), AcelRx Pharmaceuticals Inc (NASDAQ:ACRX), Bel Fuse, Inc. (NASDAQ:BELFA), and RCI Hospitality Holdings, Inc. (NASDAQ:RICK). This group of stocks’ market caps match DNR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PANL 2 59 0
ACRX 3 1008 -4
BELFA 4 2975 0
RICK 10 7475 1
Average 4.75 2879 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $0 million in DNR’s case. RCI Hospitality Holdings, Inc. (NASDAQ:RICK) is the most popular stock in this table. On the other hand Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL) is the least popular one with only 2 bullish hedge fund positions. Denbury Resources Inc. (NYSE:DNR) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on DNR as the stock returned 138.9% in Q2 (through June 17th) 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.