Giverny Capital Asset Management, LLC, an investment management company, recently published its second-quarter 2024 investor letter. A copy of the letter can be downloaded here. The portfolio returned -2.31% in the second quarter compared to a 4.28% return for the S&P 500 Total Return Index. The fund returned 12.31% year to date compared to the 15.29% return for the Index during the same period. The performance was hurt by low exposure to the Magnificent Seven tech stocks. For more information on the fund’s top picks in 2024, please check its top five holdings.
Giverny Capital Asset Management highlighted stocks like Five Below, Inc. (NASDAQ:FIVE), in the second quarter 2024 investor letter. Five Below, Inc. (NASDAQ:FIVE) is a US-based specialty value retailer. The one-month return of Five Below, Inc. (NASDAQ:FIVE) was -34.83%, and its shares lost 65.07% of their value over the last 52 weeks. On August 2, 2024, Five Below, Inc. (NASDAQ:FIVE) stock closed at $69.19 per share with a market capitalization of $3.81 billion.
Giverny Capital Asset Management stated the following regarding Five Below, Inc. (NASDAQ:FIVE) in its Q2 2024 investor letter:
“On the negative side of the ledger, Five Below, Inc. (NASDAQ:FIVE) lost 49% of its value in the first half of the year, with most of the drop happening in the second quarter. Five Below sells low-priced merchandise to a wide demographic swath, but about half of its customers have household income of less than $50,000 a year. These folks have pulled back on spending. In addition, Five Below is one of many retailers battling a shoplifting problem as some cities have stopped prosecuting petty crime. Store profit margins have shrunk as thefts have risen, but the double-whammy is that sales also decline when retailers take steps to make it harder to steal, such as putting more items behind lock and key.
I believe Five Below is having some success reducing theft, but that may be coming at the expense of lower sales. As I finished this letter, Five Below announced that it has parted ways with long-time CEO Joel Anderson amid continuing sluggish results. The stock took another leg down in valuation from already depressed levels.
Clearly, the company is struggling and I will be reexamining our thesis for owning it. Over the past five years, Five Below has grown sales by 18% annually and net earnings by 15%, as theft compressed profit margins. That’s still a level of growth most businesses aspire to reach. The CEO job ought to be one of the more desirable ones in retail.”
A family happily shopping for everyday items in a specialty retail store.
Five Below, Inc. (NASDAQ:FIVE) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 39 hedge fund portfolios held Five Below, Inc. (NASDAQ:FIVE) at the end of the first quarter which was 33 in the previous quarter. Five Below, Inc.’s (NASDAQ:FIVE) sales climbed by 11.8% to $811.9 million in the first quarter of 2024 from $726.2 million in Q1 2023. The first quarter results were below expectations as the second half of the quarter saw a notable downturn in sales. While we acknowledge the potential of Five Below, Inc. (NASDAQ:FIVE) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Five Below, Inc. (NASDAQ:FIVE) and shared Polen U.S. SMID Company Growth Strategy’s views on the company. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
