Box (BOX) Has Fallen 1% in Last One Year, Underperforms Market

If you are looking for the best ideas for your portfolio you may want to consider some of White Brook Capital’s top stock picks. White Brook Capital, an investment management firm, is bullish on Box Inc (NYSE:BOX) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Box Inc (NYSE:BOX) stock. Box Inc (NYSE:BOX) is an internet company based in California.

White Brook Capital said that Box Inc (NYSE:BOX) was one of its largest position in Q2 2019. Box Inc (NYSE:BOX) stock has posted a return of -0.7% in the trailing one year period, underperforming fund’s benchmark the S&P 500 Index which returned 11.1% in the same period. This suggests that the investment firm was wrong in its decision. On a year-to-date basis, Box Inc (NYSE:BOX) stock has risen by 6.0%.

White Brook Capital fund posted a return of 5.46% in the second quarter of 2019, outperforming fund’s benchmark the S&P 500 Index which returned 4.30% in the same period. Let’s take a look at comments made by White Brook Capital about Box Inc (NYSE:BOX) stock in the Q2 2019 investor letter.

“Box, White Brook’s largest position, reported an in-line quarter and disappointing guidance for the year, reducing expectations for a second time in two quarters. When they reported last quarter, I had hoped that they had fully considered possible headwinds rather than having to lower guidance again this quarter.

There were three revenue items of note:

1. They have a large customer that is churning off. I believe it to be GE, which has very significant and well publicized cash flow problems. True retention revenue growth would have been closer to a much more acceptable 10% than 8% without the customer churning off.

2. Deals are getting bigger and the closings are taking longer. If deals were only taking longer to close and were the same size, I’d be concerned. If deals were getting smaller and were closing in the same amount of time, I’d be very concerned. But management indicated that deals are getting larger and more involved.

3. The EMEA region which hasn’t been productive, closed several deals. This is one of the first signs of progress in the region in a long time even while the total contribution was small.

My investment case in Box modelled for deals to be increasing in size and closing in the same amount of time as smaller deals. The extension is a cause for some concern, but if successful, Box’s stock price should benefit tremendously. White Brook looks for companies that are either the best, easiest, cheapest, or necessary for its customers, with the obtainment of one and development of another key to our investment case. Box has been the best for some time, particularly within large companies and regulated industries, and it’s platform is now able to facilitate company processes that are fundamental to an organization’s next 5 years of development. It’s becoming necessary for companies that want to understand how much can be done with their data, break the silos that previously prevented that information from being used, and optimize processes to collect, analyze, and use data throughout their organizations to use Box. Simple sharing and collaboration, has been commoditized, but for organizations that want to do that plus use artificial intelligence and workflow processes to enhance productivity across business functions, Box’s function lead is growing. In the near term, the hope is that the largest deals that have been delayed will close in the coming quarters as Companies’ more extended due diligence processes end and decisions are made.

As I look forward, the company doesn’t have regulatory risk present in other large cap tech companies and is likely to be a beneficiary if regulation comes for the industry. Additionally, its scalable capabilities mean it’s a high-quality asset for others who need to get bigger, or need a more significant enterprise focused, feature rich offering. Dropbox comes to mind, as does Atlassian, Apple, and Salesforce. It’s platform neutral, best of breed, open-AI market position continues to be a good one. With two expectation misses in a row, the company has little credibility in the stock market and the stock price reflects it. In the marketplace, however, they continue to be regarded as best of breed. The risk/reward is extreme in my view and a quarter or two of solid execution would be extremely meaningful for the stock price. We continue to maintain a large position in Box.”

In Q1 2020, the number of bullish hedge fund positions on Box Inc (NYSE:BOX) stock decreased by about 3% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with Box’s growth potential. Our calculations showed that Box Inc (NYSE:BOX) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. You can subscribe to our free enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.