Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Black Box Corporation (NASDAQ:BBOX).
Is Black Box Corporation (NASDAQ:BBOX) a cheap investment now? The smart money seem to be taking an optimistic view, as the number of bullish hedge fund bets among investors tracked by us inched up by one during the third 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 DRDGOLD Ltd. (ADR) (NYSE:DRD), Lee Enterprises, Incorporated (NYSE:LEE), and Pfenex Inc (NYSEMKT:PFNX) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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With all of this in mind, we’re going to take a gander at the new action encompassing Black Box Corporation (NASDAQ:BBOX).
Hedge fund activity in Black Box Corporation (NASDAQ:BBOX)
Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BBOX over the last five quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies, one of the largest hedge funds in the world, holds the biggest position in Black Box Corporation (NASDAQ:BBOX). Renaissance Technologies has a $6.1 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, holding a $4.7 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions contain D. E. Shaw’s D E Shaw, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and John Overdeck and David Siegel’s Two Sigma Advisors. 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.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Black Box Corporation (NASDAQ:BBOX) headfirst. Hutchin Hill Capital, led by Neil Chriss, created the biggest position in Black Box Corporation (NASDAQ:BBOX). Hutchin Hill Capital had $0.3 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.2 million position during the quarter.
Let’s go over hedge fund activity in other stocks similar to Black Box Corporation (NASDAQ:BBOX). We will take a look at DRDGOLD Ltd. (ADR) (NYSE:DRD), Lee Enterprises, Incorporated (NYSE:LEE), Pfenex Inc (NYSEMKT:PFNX), and EndoChoice Holdings Inc (NYSE:GI). All of these stocks’ market caps are closest to BBOX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DRD | 6 | 12883 | 2 |
| LEE | 10 | 8969 | 1 |
| PFNX | 8 | 18999 | -1 |
| GI | 8 | 11746 | 1 |
As you can see these stocks had an average of eight funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $18 million in BBOX’s case. Lee Enterprises, Incorporated (NYSE:LEE) is the most popular stock in this table. On the other hand DRDGOLD Ltd. (ADR) (NYSE:DRD) is the least popular one with only six bullish hedge fund positions. Black Box Corporation (NASDAQ:BBOX) registers the same level of popularity as Lee Enterprises, which suggests that it may be a good idea to analyze this stock in more detail and potentially adding it to one’s portfolio.
Disclosure: none
