Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Denny’s Corporation (NASDAQ:DENN).
Hedge fund interest in Denny’s Corporation (NASDAQ:DENN) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Re/Max Holdings Inc (NYSE:RMAX), IGM Biosciences, Inc. (NASDAQ:IGMS), and Oi SA (NYSE:OIBR) to gather more data points. Our calculations also showed that DENN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the “next Amazon” in this video; again we are listening. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the fresh hedge fund action regarding Denny’s Corporation (NASDAQ:DENN).
What have hedge funds been doing with Denny’s Corporation (NASDAQ:DENN)?
At Q4’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in DENN over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, founded by Jim Simons, holds the number one position in Denny’s Corporation (NASDAQ:DENN). Renaissance Technologies has a $61.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Cardinal Capital, led by Amy Minella, holding a $38.8 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Other peers that hold long positions comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to Denny’s Corporation (NASDAQ:DENN), around 1.19% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, earmarking 0.99 percent of its 13F equity portfolio to DENN.
Due to the fact that Denny’s Corporation (NASDAQ:DENN) has witnessed falling interest from hedge fund managers, it’s safe to say that there exists a select few money managers who were dropping their positions entirely last quarter. It’s worth mentioning that Lee Ainslie’s Maverick Capital cut the largest investment of all the hedgies tracked by Insider Monkey, worth about $5.7 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund cut about $0.5 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Denny’s Corporation (NASDAQ:DENN). We will take a look at Re/Max Holdings Inc (NYSE:RMAX), IGM Biosciences, Inc. (NASDAQ:IGMS), Oi SA (NYSE:OIBR), and Franks International NV (NYSE:FI). This group of stocks’ market values are similar to DENN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RMAX | 17 | 79279 | 7 |
| IGMS | 12 | 319601 | 1 |
| OIBR | 12 | 191854 | 1 |
| FI | 10 | 21471 | -1 |
| Average | 12.75 | 153051 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $158 million in DENN’s case. Re/Max Holdings Inc (NYSE:RMAX) is the most popular stock in this table. On the other hand Franks International NV (NYSE:FI) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Denny’s Corporation (NASDAQ:DENN) is more popular among hedge funds. 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 1.0% in 2020 through May 1st and still beat the market by 12.9 percentage points. Unfortunately DENN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on DENN were disappointed as the stock returned -44.6% during the four months of 2020 (through May 1st) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
