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Hedge Funds Have Never Been This Bullish On Box, Inc. (BOX)

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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Box, Inc. (NYSE:BOX).

Is Box, Inc. (NYSE:BOX) a buy here? Investors who are in the know were taking an optimistic view. The number of long hedge fund bets moved up by 12 in recent months. Box, Inc. (NYSE:BOX) was in 43 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was 41. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BOX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Robert Moses RGM Capital
Robert Moses RGM Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 we're going to take a glance at the key hedge fund action encompassing Box, Inc. (NYSE:BOX).

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

At Q1's end, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 39% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in BOX a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Is BOX A Good Stock To Buy?
Is BOX A Good Stock To Buy?

Among these funds, Starboard Value LP held the most valuable stake in Box, Inc. (NYSE:BOX), which was worth $292.7 million at the end of the fourth quarter. On the second spot was RGM Capital which amassed $161.2 million worth of shares. Sunriver Management, Two Sigma Advisors, and Citadel Investment Group 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 Harbert Management allocated the biggest weight to Box, Inc. (NYSE:BOX), around 10.83% of its 13F portfolio. Sunriver Management is also relatively very bullish on the stock, earmarking 8.73 percent of its 13F equity portfolio to BOX.

As one would reasonably expect, some big names were leading the bulls' herd. Freshford Capital Management, managed by Michael Doheny, created the most outsized position in Box, Inc. (NYSE:BOX). Freshford Capital Management had $27.4 million invested in the company at the end of the quarter. Raymond J. Harbert's Harbert Management also initiated a $23 million position during the quarter. The other funds with brand new BOX positions are Cynthia Paul's Lynrock Lake, Joseph Samuels's Islet Management, and Derek C. Schrier's Indaba Capital Management.

Let's check out hedge fund activity in other stocks similar to Box, Inc. (NYSE:BOX). These stocks are Stamps.com Inc. (NASDAQ:STMP), AAON, Inc. (NASDAQ:AAON), Sabra Health Care REIT Inc (NASDAQ:SBRA), Ameris Bancorp (NASDAQ:ABCB), Franklin Electric Co. (NASDAQ:FELE), Univar Solutions Inc (NYSE:UNVR), and Nektar Therapeutics (NASDAQ:NKTR). This group of stocks' market caps are closest to BOX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STMP,32,578028,-6 AAON,16,47793,3 SBRA,21,112267,1 ABCB,16,101268,-2 FELE,20,209341,3 UNVR,25,742227,-6 NKTR,18,234537,-1 Average,21.1,289352,-1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $289 million. That figure was $863 million in BOX's case. Stamps.com Inc. (NASDAQ:STMP) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Box, Inc. (NYSE:BOX) is more popular among hedge funds. Our overall hedge fund sentiment score for BOX is 90. 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 17.4% in 2021 through June 18th and still managed to beat the market by 6.1 percentage points. Hedge funds were also right about betting on BOX, though not to the same extent, as the stock returned 8.8% since the end of March (through June 18th) and outperformed the market as well.

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