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Hedge Funds Have Never Been This Bullish On Jack in the Box Inc. (JACK)

Nina Todic

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and optimism towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the first quarter and hedging or reducing many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Jack in the Box Inc. (NASDAQ:JACK).

Is Jack in the Box Inc. (NASDAQ:JACK) a cheap investment now? Money managers are becoming hopeful. The number of bullish hedge fund positions increased by 7 in recent months. Our calculations also showed that jack isn't among the 30 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Barry Rosenstein JANA PARTNERS

We're going to take a look at the key hedge fund action surrounding Jack in the Box Inc. (NASDAQ:JACK).

What does the smart money think about Jack in the Box Inc. (NASDAQ:JACK)?

At the end of the first quarter, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards JACK over the last 15 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

No of Hedge Funds with JACK Positions

According to Insider Monkey's hedge fund database, Blue Harbour Group, managed by Clifton S. Robbins, holds the largest position in Jack in the Box Inc. (NASDAQ:JACK). Blue Harbour Group has a $130.1 million position in the stock, comprising 7.6% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, managed by Ken Griffin, which holds a $78.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions comprise Barry Rosenstein's JANA Partners, Israel Englander's Millennium Management and Robert Pohly's Samlyn Capital.

As industrywide interest jumped, key money managers have jumped into Jack in the Box Inc. (NASDAQ:JACK) headfirst. Interval Partners, managed by Gregg Moskowitz, assembled the most valuable position in Jack in the Box Inc. (NASDAQ:JACK). Interval Partners had $14.2 million invested in the company at the end of the quarter. Jim Simons's Renaissance Technologies also made a $12.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Steven Boyd's Armistice Capital, Elise Di Vincenzo Crumbine's Stormborn Capital Management, and Leon Shaulov's Maplelane Capital.

Let's now take a look at hedge fund activity in other stocks similar to Jack in the Box Inc. (NASDAQ:JACK). These stocks are Inogen Inc (NASDAQ:INGN), TransAlta Corporation (NYSE:TAC), Regenxbio Inc (NASDAQ:RGNX), and Caretrus REIT Inc (NASDAQ:CTRE). This group of stocks' market values resemble JACK's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INGN,17,136102,-8 TAC,11,29092,2 RGNX,19,317732,2 CTRE,16,108917,0 Average,15.75,147961,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $645 million in JACK's case. Regenxbio Inc (NASDAQ:RGNX) is the most popular stock in this table. On the other hand TransAlta Corporation (NYSE:TAC) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Jack in the Box Inc. (NASDAQ:JACK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on JACK as the stock returned 2% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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