Should I Avoid Box, Inc. (BOX)?

At Insider Monkey, we pore over the filings of nearly 867 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30th. In this article, we will use that wealth of knowledge to determine whether or not Box, Inc. (NYSE:BOX) makes for a good investment right now.

Box, Inc. (NYSE:BOX) has experienced a decrease in support from the world’s most elite money managers lately. Box, Inc. (NYSE:BOX) was in 29 hedge funds’ portfolios at the end of September. The all time high for this statistic is 43. Our calculations also showed that BOX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now let’s view the recent hedge fund action regarding Box, Inc. (NYSE:BOX).

Robert Moses of RGM Capital

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

Heading into the fourth quarter of 2021, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BOX over the last 25 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

The largest stake in Box, Inc. (NYSE:BOX) was held by Starboard Value LP, which reported holding $289.1 million worth of stock at the end of September. It was followed by RGM Capital with a $110.8 million position. Other investors bullish on the company included Freshford Capital Management, Sunriver Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Freshford Capital Management allocated the biggest weight to Box, Inc. (NYSE:BOX), around 7.1% of its 13F portfolio. Sunriver Management is also relatively very bullish on the stock, setting aside 6.6 percent of its 13F equity portfolio to BOX.

Judging by the fact that Box, Inc. (NYSE:BOX) has experienced a decline in interest from the smart money, logic holds that there lies a certain “tier” of funds that elected to cut their positions entirely heading into Q4. It’s worth mentioning that Frank Fu’s CaaS Capital dumped the largest stake of the 750 funds followed by Insider Monkey, valued at close to $22.9 million in stock, and Cynthia Paul’s Lynrock Lake was right behind this move, as the fund dropped about $17 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 6 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Box, Inc. (NYSE:BOX). These stocks are Resideo Technologies, Inc. (NYSE:REZI), Enact Holdings Inc. (NASDAQ:ACT), Macquarie Infrastructure Holdings, LLC (NYSE:MIC), Academy Sports and Outdoors, Inc. (NASDAQ:ASO), Onto Innovation Inc. (NYSE:ONTO), The Macerich Company (NYSE:MAC), and Dillard’s, Inc. (NYSE:DDS). This group of stocks’ market valuations resemble BOX’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $421 million. That figure was $644 million in BOX’s case. Academy Sports and Outdoors, Inc. (NASDAQ:ASO) is the most popular stock in this table. On the other hand The Macerich Company (NYSE:MAC) is the least popular one with only 10 bullish hedge fund positions. Box, Inc. (NYSE:BOX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BOX is 44.2. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately BOX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BOX were disappointed as the stock returned -1.1% since the end of September (through 11/30) 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 many of these stocks already outperformed the market since 2019.

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