Investors Are Losing Confidence In Black Box Corporation (BBOX)

Hedge fund managers like David Einhorn, Dan Loeb, and Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in a micro-cap stock: Black Box Corporation (NASDAQ:BBOX).

Is Black Box Corporation (NASDAQ:BBOX) the right investment to pursue these days? Hedge funds are selling. The number of bullish hedge fund bets was trimmed by 2 recently. 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, or vice versa. That’s why at the end of this article we will examine companies such as Strattec Security Corp. (NASDAQ:STRT), Penn West Petroleum Ltd (USA) (NYSE:PWE), and Atlantic Power Corp (NYSE:AT) to gather more data points.

In the 21st century investor’s toolkit there are many tools stock traders put to use to grade publicly traded companies. A couple of the less utilized tools are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outclass their index-focused peers by a very impressive margin (see the details here).

Keeping this in mind, let’s analyze the new action encompassing Black Box Corporation (NASDAQ:BBOX).

How have hedgies been trading Black Box Corporation (NASDAQ:BBOX)?

Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 15% dip from the previous quarter. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies, founded by Jim Simons, holds the most valuable position in Black Box Corporation (NASDAQ:BBOX). Renaissance Technologies has a $3.4 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second-largest stake is held by Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $2.2 million position; less than 0.1% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish include D E Shaw, Israel Englander’s Millennium Management, and John Overdeck and David Siegel’s Two Sigma Advisors.

Due to the fact that Black Box Corporation (NASDAQ:BBOX) has faced a declination in interest from the entirety of the hedge funds we track, we can see that there is a sect of hedgies that elected to cut their entire stakes by the end of the third quarter. At the top of the heap, Neil Chriss’ Hutchin Hill Capital sold off the biggest position of the 700 funds monitored by Insider Monkey, worth close to $0.3 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dumped about $0.3 million worth of shares. These moves are important to note, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Black Box Corporation (NASDAQ:BBOX) but similarly valued. These stocks are Strattec Security Corp. (NASDAQ:STRT), Penn West Petroleum Ltd (USA) (NYSE:PWE), Atlantic Power Corp (NYSE:AT), and KMG Chemicals, Inc. (NYSE:KMG). All of these stocks’ market caps resemble Black Box Corporation’s market cap.

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 $34 million. That figure was $12 million in Black Box Corporation’s case. Penn West Petroleum Ltd (USA) (NYSE:PWE) is the most popular stock in this table. On the other hand Strattec Security Corp. (NASDAQ:STRT) is the least popular one with only 5 bullish hedge fund positions. Black Box Corporation (NASDAQ:BBOX) 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 Penn West might be a better candidate to consider a long position in.