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Hedge Funds Are Crazy About Box, Inc. (BOX)

Abigail Fisher

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Box, Inc. (NYSE:BOX) for your portfolio? We'll look to this invaluable collective wisdom for the answer. Currently there is only one ETF with a significant weight in BOX: WisdomTree Cloud Computing Fund (NASDAQ:WCLD).

Is Box, Inc. (NYSE:BOX) a buy, sell, or hold? Money managers are turning bullish. The number of long hedge fund bets went up by 4 in recent months. Our calculations also showed that BOX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds
5 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_783421" align="aligncenter" width="473"] Ryan Frick of Dorsal Capital[/caption]

Ryan Frick Dorsal Capital
Ryan Frick Dorsal Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a peek at the latest hedge fund action encompassing Box, Inc. (NYSE:BOX).

What have hedge funds been doing with Box, Inc. (NYSE:BOX)?

Heading into the fourth quarter of 2019, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BOX over the last 17 quarters. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

BOX_dec2019
BOX_dec2019

Among these funds, Starboard Value LP held the most valuable stake in Box, Inc. (NYSE:BOX), which was worth $115.5 million at the end of the third quarter. On the second spot was Bares Capital Management which amassed $106.9 million worth of shares. RGM Capital, Dorsal Capital Management, and Millennium Management 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 North Run Capital allocated the biggest weight to Box, Inc. (NYSE:BOX), around 7.52% of its portfolio. Cloverdale Capital Management is also relatively very bullish on the stock, dishing out 6.86 percent of its 13F equity portfolio to BOX.

Now, some big names were breaking ground themselves. Starboard Value LP, managed by Jeffrey Smith, established the largest position in Box, Inc. (NYSE:BOX). Starboard Value LP had $115.5 million invested in the company at the end of the quarter. Kenneth Squire's 13D Management also made a $10.3 million investment in the stock during the quarter. The other funds with brand new BOX positions are Matthew Mark's Jet Capital Investors, Brandon Haley's Holocene Advisors, and Marc Majzner's Clearline Capital.

Let's now review hedge fund activity in other stocks similar to Box, Inc. (NYSE:BOX). We will take a look at Allegiant Travel Company (NASDAQ:ALGT), Werner Enterprises, Inc. (NASDAQ:WERN), The Chemours Company (NYSE:CC), and Saia Inc (NASDAQ:SAIA). All of these stocks' market caps resemble BOX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALGT,16,530035,-2 WERN,18,112767,3 CC,29,273189,1 SAIA,13,66696,4 Average,19,245672,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $246 million. That figure was $554 million in BOX's case. The Chemours Company (NYSE:CC) is the most popular stock in this table. On the other hand Saia Inc (NASDAQ:SAIA) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Box, Inc. (NYSE:BOX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on BOX, though not to the same extent, as the stock returned 10.1% during the fourth quarter (through the end of November) and outperformed the market as well.

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

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