It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Box, Inc. (NYSE:BOX) during the quarter below.
Is Box, Inc. (NYSE:BOX) a buy, sell, or hold? Money managers are getting less optimistic. The number of bullish hedge fund positions were trimmed by 2 lately. Our calculations also showed that box isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 analyze the key hedge fund action surrounding Box, Inc. (NYSE:BOX).
What does the smart money think about Box, Inc. (NYSE:BOX)?
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. By comparison, 30 hedge funds held shares or bullish call options in BOX a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Box, Inc. (NYSE:BOX) was held by Bares Capital Management, which reported holding $158.8 million worth of stock at the end of December. It was followed by SQN Investors with a $66.8 million position. Other investors bullish on the company included Renaissance Technologies, Portolan Capital Management, and Millennium Management.
Due to the fact that Box, Inc. (NYSE:BOX) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there exists a select few money managers who were dropping their full holdings heading into Q3. It’s worth mentioning that Joseph A. Jolson’s Harvest Capital Strategies dropped the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at about $14.3 million in stock, and Jack Ripsteen’s Potrero Capital Research was right behind this move, as the fund sold off about $8 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds heading into Q3.
Let’s also examine hedge fund activity in other stocks similar to Box, Inc. (NYSE:BOX). These stocks are Houlihan Lokey Inc (NYSE:HLI), Nextera Energy Partners LP (NYSE:NEP), Rexnord Corp (NYSE:RXN), and The Geo Group, Inc. (NYSE:GEO). This group of stocks’ market caps are closest to BOX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HLI | 18 | 138227 | 4 |
| NEP | 12 | 35346 | 0 |
| RXN | 19 | 133137 | 4 |
| GEO | 18 | 95266 | 1 |
| Average | 16.75 | 100494 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $386 million in BOX’s case. Rexnord Corp (NYSE:RXN) is the most popular stock in this table. On the other hand Nextera Energy Partners LP (NYSE:NEP) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Box, Inc. (NYSE:BOX) 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. Hedge funds were also right about betting on BOX, though not to the same extent, as the stock returned 16.8% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
