Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether Five9 Inc (NASDAQ:FIVN) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Five9 Inc (NASDAQ:FIVN) investors should pay attention to an increase in hedge fund interest of late. FIVN was in 35 hedge funds’ portfolios at the end of December. There were 33 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 (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a lot of gauges stock traders put to use to size up stocks. A pair of the most innovative gauges are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can outpace the broader indices by a very impressive amount (see the details here).
Lee Ainslie of Maverick Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the fresh hedge fund action surrounding Five9 Inc (NASDAQ:FIVN).
Hedge fund activity in Five9 Inc (NASDAQ:FIVN)
At the end of the fourth quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in FIVN over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Sylebra Capital Management, managed by Daniel Patrick Gibson, holds the biggest position in Five9 Inc (NASDAQ:FIVN). Sylebra Capital Management has a $157.3 million position in the stock, comprising 6.2% of its 13F portfolio. On Sylebra Capital Management’s heels is Panayotis Takis Sparaggis of Alkeon Capital Management, with a $129.1 million position; 0.5% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism encompass Brett Barakett’s Tremblant Capital, Alex Sacerdote’s Whale Rock Capital Management and Brian Ashford-Russell and Tim Woolley’s Polar Capital. In terms of the portfolio weights assigned to each position Sylebra Capital Management allocated the biggest weight to Five9 Inc (NASDAQ:FIVN), around 6.18% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, setting aside 6.12 percent of its 13F equity portfolio to FIVN.
As industrywide interest jumped, specific money managers have been driving this bullishness. Maverick Capital, managed by Lee Ainslie, established the largest position in Five9 Inc (NASDAQ:FIVN). Maverick Capital had $2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $1.7 million position during the quarter. The other funds with new positions in the stock are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Michael Gelband’s ExodusPoint Capital, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Five9 Inc (NASDAQ:FIVN) but similarly valued. These stocks are Equity Commonwealth (NYSE:EQC), Service Properties Trust (NASDAQ:SVC), Alcoa Corporation (NYSE:AA), and Medallia, Inc. (NYSE:MDLA). This group of stocks’ market values are closest to FIVN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EQC | 22 | 140966 | -4 |
| SVC | 17 | 59382 | 2 |
| AA | 30 | 660355 | -3 |
| MDLA | 22 | 301398 | -1 |
| Average | 22.75 | 290525 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $291 million. That figure was $632 million in FIVN’s case. Alcoa Corporation (NYSE:AA) is the most popular stock in this table. On the other hand Service Properties Trust (NASDAQ:SVC) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Five9 Inc (NASDAQ:FIVN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still managed to beat the market by 5.5 percentage points. Hedge funds were also right about betting on FIVN as the stock returned 6.5% so far in Q1 (through March 25th) 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.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
