It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Jack in the Box Inc. (NASDAQ:JACK).
Jack in the Box Inc. (NASDAQ:JACK) shareholders have witnessed a decrease in support from the world’s most successful money managers recently. JACK was in 27 hedge funds’ portfolios at the end of the third quarter of 2016. There were 28 hedge funds in our database with JACK positions at the end of the previous quarter. 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. That’s why at the end of this article we will examine companies such as Flowers Foods, Inc. (NYSE:FLO), DuPont Fabros Technology, Inc. (NYSE:DFT), and Bank of Hawaii Corporation (NYSE:BOH) to gather more data points.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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How are hedge funds trading Jack in the Box Inc. (NASDAQ:JACK)?
At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a fall of 4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards JACK over the last 5 quarters. So, let’s find out 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, Israel Englander’s Millennium Management has the number one position in Jack in the Box Inc. (NASDAQ:JACK), worth close to $74.9 million. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, which holds a $68.4 million position. Some other peers that are bullish include Kamyar Khajavi’s MIK Capital, Cliff Asness’ AQR Capital Management and Steve Cohen’s Point72 Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually cut their positions entirely. Interestingly, Lee Ainslie’s Maverick Capital cut the biggest investment of the 700 funds studied by Insider Monkey, totaling an estimated $57.3 million in stock. Gabriel Plotkin’s fund, Melvin Capital Management, also sold off its stock, about $34.4 million worth.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Jack in the Box Inc. (NASDAQ:JACK) but similarly valued. We will take a look at Flowers Foods, Inc. (NYSE:FLO), DuPont Fabros Technology, Inc. (NYSE:DFT), Bank of Hawaii Corporation (NYSE:BOH), and Avis Budget Group Inc. (NASDAQ:CAR). This group of stocks’ market values resemble JACK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FLO | 17 | 150135 | -6 |
| DFT | 18 | 269013 | -1 |
| BOH | 10 | 49640 | 2 |
| CAR | 30 | 1080116 | -3 |
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $387 million. That figure was $423 million in JACK’s case. Avis Budget Group Inc. (NASDAQ:CAR) is the most popular stock in this table. On the other hand Bank of Hawaii Corporation (NYSE:BOH) is the least popular one with only 10 bullish hedge fund positions. Jack in the Box Inc. (NASDAQ:JACK) 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 CAR might be a better candidate to consider taking a long position in.
Disclosure: None
