Is Jack in the Box Inc. (JACK) Going to Burn These Hedge Funds?

In this article we will analyze whether Jack in the Box Inc. (NASDAQ:JACK) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Jack in the Box Inc. (NASDAQ:JACK) has seen a decrease in hedge fund interest lately. Jack in the Box Inc. (NASDAQ:JACK) was in 29 hedge funds’ portfolios at the end of June. The all time high for this statistic is 38. Our calculations also showed that JACK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Einhorn of Greenlight Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a gander at the fresh hedge fund action encompassing Jack in the Box Inc. (NASDAQ:JACK).

Do Hedge Funds Think JACK Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards JACK over the last 24 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Scopus Asset Management was the largest shareholder of Jack in the Box Inc. (NASDAQ:JACK), with a stake worth $44.6 million reported as of the end of June. Trailing Scopus Asset Management was Arrowstreet Capital, which amassed a stake valued at $43.7 million. Two Sigma Advisors, AQR Capital Management, and Greenlight Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Franklin Street Capital allocated the biggest weight to Jack in the Box Inc. (NASDAQ:JACK), around 2.25% of its 13F portfolio. Greenlight Capital is also relatively very bullish on the stock, setting aside 0.98 percent of its 13F equity portfolio to JACK.

Judging by the fact that Jack in the Box Inc. (NASDAQ:JACK) has faced falling interest from hedge fund managers, it’s easy to see that there was a specific group of fund managers that elected to cut their full holdings in the second quarter. Intriguingly, Andrew Kurita’s Kettle Hill Capital Management cut the largest position of all the hedgies tracked by Insider Monkey, valued at close to $7.2 million in stock, and Louis Bacon’s Moore Global Investments was right behind this move, as the fund dumped about $5.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds in the second quarter.

Let’s also examine 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 The Buckle, Inc. (NYSE:BKE), Manchester United PLC (NYSE:MANU), Mueller Industries, Inc. (NYSE:MLI), Uniti Group Inc. (NASDAQ:UNIT), Health Catalyst, Inc (NASDAQ:HCAT), AeroVironment, Inc. (NASDAQ:AVAV), and Magellan Health Inc (NASDAQ:MGLN). This group of stocks’ market valuations are similar to JACK’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $264 million. That figure was $227 million in JACK’s case. Magellan Health Inc (NASDAQ:MGLN) is the most popular stock in this table. On the other hand Manchester United PLC (NYSE:MANU) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Jack in the Box Inc. (NASDAQ:JACK) is more popular among hedge funds. Our overall hedge fund sentiment score for JACK is 76.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Unfortunately JACK wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on JACK were disappointed as the stock returned -11.7% since the end of the second quarter (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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