Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Five Below Inc (NASDAQ:FIVE).
Five Below Inc (NASDAQ:FIVE) investors should pay attention to an increase in enthusiasm from smart money in recent months. Five Below Inc (NASDAQ:FIVE) was in 43 hedge funds’ portfolios at the end of March. The all time high for this statistic is 44. There were 42 hedge funds in our database with FIVE holdings at the end of December. Our calculations also showed that FIVE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
At the moment there are a lot of gauges investors have at their disposal to size up publicly traded companies. A pair of the less known gauges are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outperform the S&P 500 by a very impressive margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Aaron Cowen of Suvretta Capital Management
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. Now let’s go over the recent hedge fund action encompassing Five Below Inc (NASDAQ:FIVE).
Do Hedge Funds Think FIVE Is A Good Stock To Buy Now?
At the end of March, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FIVE over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in Five Below Inc (NASDAQ:FIVE), which was worth $154.2 million at the end of the fourth quarter. On the second spot was Suvretta Capital Management which amassed $152.7 million worth of shares. Chilton Investment Company, Balyasny Asset Management, and Pacifica Capital Investments 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 Pacifica Capital Investments allocated the biggest weight to Five Below Inc (NASDAQ:FIVE), around 23.75% of its 13F portfolio. Crestwood Capital Management is also relatively very bullish on the stock, setting aside 6.94 percent of its 13F equity portfolio to FIVE.
As aggregate interest increased, key hedge funds have jumped into Five Below Inc (NASDAQ:FIVE) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the largest position in Five Below Inc (NASDAQ:FIVE). Arrowstreet Capital had $43.1 million invested in the company at the end of the quarter. Frank Fu’s CaaS Capital also initiated a $19.1 million position during the quarter. The following funds were also among the new FIVE investors: Renaissance Technologies, Anthony Joseph Vaccarino’s North Fourth Asset Management, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s check out hedge fund activity in other stocks similar to Five Below Inc (NASDAQ:FIVE). These stocks are Iron Mountain Incorporated (NYSE:IRM), Repligen Corporation (NASDAQ:RGEN), Trex Company, Inc. (NYSE:TREX), CBOE Global Markets Inc (NASDAQ:CBOE), American Homes 4 Rent (NYSE:AMH), Cemex SAB de CV (NYSE:CX), and Five9 Inc (NASDAQ:FIVN). This group of stocks’ market caps match FIVE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IRM | 16 | 56371 | -2 |
| RGEN | 38 | 1039405 | 1 |
| TREX | 23 | 203682 | -7 |
| CBOE | 33 | 767928 | -5 |
| AMH | 27 | 677079 | 0 |
| CX | 24 | 471444 | 2 |
| FIVN | 45 | 1641865 | -2 |
| Average | 29.4 | 693968 | -1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $694 million. That figure was $1010 million in FIVE’s case. Five9 Inc (NASDAQ:FIVN) is the most popular stock in this table. On the other hand Iron Mountain Incorporated (NYSE:IRM) is the least popular one with only 16 bullish hedge fund positions. Five Below Inc (NASDAQ:FIVE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FIVE is 81.9. 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 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately FIVE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FIVE were disappointed as the stock returned -4% since the end of March (through 6/18) 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.
