Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space.
Is Jack in the Box Inc. (NASDAQ:JACK) a buy right now? Money managers are taking a bullish view. The number of long hedge fund positions improved by 3 recently. Our calculations also showed that JACK isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to go over the recent hedge fund action regarding Jack in the Box Inc. (NASDAQ:JACK).
What have hedge funds been doing with Jack in the Box Inc. (NASDAQ:JACK)?
Heading into the first quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards JACK over the last 14 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Blue Harbour Group, managed by Clifton S. Robbins, holds the most valuable position in Jack in the Box Inc. (NASDAQ:JACK). Blue Harbour Group has a $163.4 million position in the stock, comprising 8.7% of its 13F portfolio. On Blue Harbour Group’s heels is JANA Partners, led by Barry Rosenstein, holding a $123.2 million position; the fund has 5.6% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism consist of Israel Englander’s Millennium Management, Paul Marshall and Ian Wace’s Marshall Wace LLP and Ken Griffin’s Citadel Investment Group.
Consequently, key money managers were leading the bulls’ herd. 13D Management, managed by Kenneth Squire, assembled the largest position in Jack in the Box Inc. (NASDAQ:JACK). 13D Management had $12.4 million invested in the company at the end of the quarter. Guy Shahar’s DSAM Partners also made a $10.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Clint Carlson’s Carlson Capital, Anthony Joseph Vaccarino’s North Fourth Asset Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s go over hedge fund activity in other stocks similar to Jack in the Box Inc. (NASDAQ:JACK). These stocks are Central Garden & Pet Co (NASDAQ:CENT), BioTelemetry, Inc. (NASDAQ:BEAT), Crestwood Equity Partners LP (NYSE:CEQP), and Cirrus Logic, Inc. (NASDAQ:CRUS). This group of stocks’ market values are closest to JACK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CENT | 24 | 147833 | 4 |
| BEAT | 24 | 75826 | 8 |
| CEQP | 3 | 25732 | -1 |
| CRUS | 20 | 174774 | -1 |
| Average | 17.75 | 106041 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $106 million. That figure was $625 million in JACK’s case. Central Garden & Pet Co (NASDAQ:CENT) is the most popular stock in this table. On the other hand Crestwood Equity Partners LP (NYSE:CEQP) is the least popular one with only 3 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately JACK wasn’t nearly as popular as these 15 stock and hedge funds that were betting on JACK were disappointed as the stock returned 0.3% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
