Jack in the Box Inc. (NASDAQ:JACK) shares have surged by 6% today after the company announced on Wednesday that it will put more of its outlets in the hands of franchisees and reduce costs in the coming years. In a presentation, Jack in the Box showed off the potential profitably it could enjoy in the coming years if it makes its franchisee-owned stores rise to 90%-to-95% of all outlets. The change could increase earnings per share in the mid-teens on a percentage basis. The San Diego-based restaurant company said it has strong growth potential in areas outside of the West Coast and Texas, where it is already strong. Analysts at Cowen maintained their ‘Outperform’ rating on the stock in a note to investors today.
How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors (see the details here). With this in mind, let’s take a look at the recent hedge fund activity surrounding Jack in the Box Inc. (NASDAQ:JACK).
Jack in the Box Inc. (NASDAQ:JACK) was in 28 hedge funds’ portfolios at the end of March. JACK investors should pay attention to an increase in hedge fund interest lately. There were 22 hedge funds in our database with JACK holdings 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 Proofpoint Inc (NASDAQ:PFPT), The Medicines Company (NASDAQ:MDCO), and LPL Financial Holdings Inc (NASDAQ:LPLA) to gather more data points.
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Of the funds tracked by Insider Monkey, Ken Griffin’s Citadel Investment Group has the largest position in Jack in the Box Inc. (NASDAQ:JACK), worth close to $37.2 million, comprising less than 0.1% of its total 13F portfolio. The second most bullish fund manager is Balyasny Asset Management, led by Dmitry Balyasny, holding a $34.6 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions consist of Aaron Cowen’s Suvretta Capital Management, Cliff Asness’ AQR Capital Management, and Gabriel Plotkin’s Melvin Capital Management.
On the next page we’ll look at some funds that took up positions in Jack in the Box during Q1, as well as compare the stock to a handful of others with similar market caps.
With general bullishness amongst the heavyweights, specific money managers were breaking ground in Q1. Suvretta Capital Management assembled the largest position in Jack in the Box Inc. (NASDAQ:JACK), having $30.7 million invested in the company at the end of the quarter. Melvin Capital Management also initiated a $24 million position during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Neil Chriss’ Hutchin Hill Capital, and Sheetal Duggal’s Thrax Management.
Let’s also examine hedge fund activity in other stocks similar to Jack in the Box Inc. (NASDAQ:JACK). These stocks are Proofpoint Inc (NASDAQ:PFPT), The Medicines Company (NASDAQ:MDCO), LPL Financial Holdings Inc (NASDAQ:LPLA), and NorthStar Asset Management Group Inc (NYSE:NSAM). This group of stocks’ market values match JACK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PFPT | 22 | 323268 | -8 |
| MDCO | 25 | 602695 | -3 |
| LPLA | 21 | 839323 | 2 |
| NSAM | 53 | 912405 | 1 |
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $669 million. That figure was $268 million in JACK’s case. NorthStar Asset Management Group Inc (NYSE:NSAM) is the most popular stock in this table. On the other hand LPL Financial Holdings Inc (NASDAQ:LPLA) is the least popular one with only 21 bullish hedge fund positions. Jack in the Box Inc. (NASDAQ:JACK) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NSAM might be a better candidate to consider a long position.
Disclosure: None
