The Reds boss guided his side to wins over Ipswich, Portsmouth, Derby County and Bristol City and a draw with Barnsley on New Year's Day.
Davies beat Leicester City's Sven-Goran Eriksson, Kenny Jackett (Watford) and Brian McDermott (Reading) who were shortlisted for the prize.
Forest lie seven points behind leaders QPR with two games in hand.
Source: BBC Sport
Source: BBC Sport