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Did Hedge Funds Make The Right Call On Jack in the Box Inc. (JACK)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtJack in the Box Inc. (NASDAQ:JACK) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Jack in the Box Inc. (NASDAQ:JACK) shareholders have witnessed an increase in hedge fund interest lately. JACK was in 28 hedge funds’ portfolios at the end of March. There were 26 hedge funds in our database with JACK positions at the end of the previous quarter. Our calculations also showed that JACK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are several methods investors have at their disposal to grade their holdings. A pair of the less utilized methods are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can trounce their index-focused peers by a significant amount (see the details here).

Lee Ainslie MAVERICK CAPITAL

Lee Ainslie of Maverick Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the fresh hedge fund action surrounding Jack in the Box Inc. (NASDAQ:JACK).

How are hedge funds trading Jack in the Box Inc. (NASDAQ:JACK)?

Heading into the second quarter of 2020, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards JACK over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is JACK A Good Stock To Buy?

The largest stake in Jack in the Box Inc. (NASDAQ:JACK) was held by JANA Partners, which reported holding $28.3 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $19.2 million position. Other investors bullish on the company included Balyasny Asset Management, Candlestick Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Scion Asset Management allocated the biggest weight to Jack in the Box Inc. (NASDAQ:JACK), around 12.24% of its 13F portfolio. JANA Partners is also relatively very bullish on the stock, designating 3.61 percent of its 13F equity portfolio to JACK.

Consequently, key hedge funds were leading the bulls’ herd. Candlestick Capital Management, managed by Jack Woodruff, assembled the biggest position in Jack in the Box Inc. (NASDAQ:JACK). Candlestick Capital Management had $15.8 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also initiated a $10.7 million position during the quarter. The other funds with brand new JACK positions are Michael Burry’s Scion Asset Management, Marc Majzner’s Clearline Capital, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now review hedge fund activity in other stocks similar to Jack in the Box Inc. (NASDAQ:JACK). These stocks are Central European Media Enterprises Ltd. (NASDAQ:CETV), Astec Industries, Inc. (NASDAQ:ASTE), Meta Financial Group Inc. (NASDAQ:CASH), and Sandy Spring Bancorp Inc. (NASDAQ:SASR). This group of stocks’ market valuations match JACK’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CETV 11 36910 1
ASTE 10 95666 1
CASH 13 71021 1
SASR 12 36542 -3
Average 11.5 60035 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $159 million in JACK’s case. Meta Financial Group Inc. (NASDAQ:CASH) is the most popular stock in this table. On the other hand Astec Industries, Inc. (NASDAQ:ASTE) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Jack in the Box Inc. (NASDAQ:JACK) 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on JACK as the stock returned 111.4% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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