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 Ackman’s recent Valeant 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 Denny’s Corporation (NASDAQ:DENN).
Denny’s Corporation (NASDAQ:DENN) was in 20 hedge funds’ portfolios at the end of the third quarter of 2015, unchanged from that of the second quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Apollo Commercial Real Est. Finance Inc (NYSE:ARI), Smith & Wesson Holding Corporation (NASDAQ:SWHC), and Infinity Property and Casualty Corp. (NASDAQ:IPCC) to gather more data points.
Now, we’re going to take a look at the latest action regarding Denny’s Corporation (NASDAQ:DENN).
How are hedge funds trading Denny’s Corporation (NASDAQ:DENN)?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, flat over the previous quarter, which is a slight bearish signal from our experience. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the largest position in Denny’s Corporation (NASDAQ:DENN), worth close to $38.5 million, amounting to 0.1% of its total 13F portfolio. The second largest stake is held by Israel Englander of Millennium Management, with a $8.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. The remaining members of the smart money that hold long positions contain Robert B. Gillam’s McKinley Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Cliff Asness’ AQR Capital Management.
Due to the fact that Denny’s Corporation (NASDAQ:DENN) has witnessed slightly bearish interest from hedge fund managers, logic holds that there exists a select few fund managers who were dropping their full holdings by the end of the third quarter. Interestingly, Neil Chriss’s Hutchin Hill Capital cut the biggest stake of the 700 funds followed by Insider Monkey, totaling about $1.2 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also sold off its stock, about $0.6 million worth.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Denny’s Corporation (NASDAQ:DENN) but similarly valued. We will take a look at Apollo Commercial Real Est. Finance Inc (NYSE:ARI), Smith & Wesson Holding Corporation (NASDAQ:SWHC), Infinity Property and Casualty Corp. (NASDAQ:IPCC), and Canadian Solar Inc. (NASDAQ:CSIQ). This group of stocks’ market valuations resemble Denny’s Corporation (NASDAQ:DENN)’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $92 million in Denny’s Corporation (NASDAQ:DENN)’s case. Smith & Wesson Holding Corporation (NASDAQ:SWHC) is the most popular stock in this table. On the other hand Infinity Property and Casualty Corp. (NASDAQ:IPCC) is the least popular one with only 8 bullish hedge fund positions. Denny’s Corporation (NASDAQ: DENN) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SWHC might be a better candidate to consider a long position.