Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth depends on it. Regardless of the various methods used by elite investors like David Tepper and Dan Loeb, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Five9 Inc (NASDAQ:FIVN) was in 25 hedge funds’ portfolios at the end of the third quarter of 2018. FIVN has seen a decrease in hedge fund interest in recent months. There were 26 hedge funds in our database with FIVN positions at the end of the previous quarter. Our calculations also showed that FIVN isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to review the new hedge fund action regarding Five9 Inc (NASDAQ:FIVN).
How are hedge funds trading Five9 Inc (NASDAQ:FIVN)?
Heading into the fourth quarter of 2018, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FIVN over the last 13 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the most valuable position in Five9 Inc (NASDAQ:FIVN). Renaissance Technologies has a $114.8 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Alkeon Capital Management, managed by Panayotis Takis Sparaggis, which holds a $87.2 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish comprise Daniel Patrick Gibson’s Sylebra Capital Management, Brett Barakett’s Tremblant Capital and Principal Global Investors’s Columbus Circle Investors.
Seeing as Five9 Inc (NASDAQ:FIVN) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there exists a select few fund managers who sold off their entire stakes in the third quarter. At the top of the heap, Bruce Garelick’s Garelick Capital Partners dropped the biggest investment of all the hedgies followed by Insider Monkey, comprising close to $18.2 million in stock. Mark Coe’s fund, Coe Capital Management, also sold off its stock, about $1.6 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Five9 Inc (NASDAQ:FIVN) but similarly valued. We will take a look at Liberty Oilfield Services Inc. (NYSE:LBRT), Quidel Corporation (NASDAQ:QDEL), Sotheby’s (NYSE:BID), and Union Bankshares Corporation (NASDAQ:UBSH). This group of stocks’ market caps match FIVN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LBRT | 8 | 127003 | 1 |
| QDEL | 15 | 132346 | -2 |
| BID | 25 | 442569 | 5 |
| UBSH | 4 | 18932 | -2 |
| Average | 13 | 180213 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $464 million in FIVN’s case. Sotheby’s (NYSE:BID) is the most popular stock in this table. On the other hand Union Bankshares Corporation (NASDAQ:UBSH) is the least popular one with only 4 bullish hedge fund positions. Five9 Inc (NASDAQ:FIVN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BID might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
