Giverny Capital Asset Management, LLC, an investment management company, recently published its first-quarter 2025 investor letter. A copy of the letter can be downloaded here. The portfolio returned -3.39% in the quarter, compared to a -4.27% return for the S&P 500 Total Return Index. For the year ended March 31, 2025, the fund returned 1.75% compared to an 8.25% return for the Index during the same period. For more information on the fund’s best picks in 2025, please check its top five holdings.
In its first quarter 2025 investor letter, Giverny Capital Asset Management highlighted stocks such as Five Below, Inc. (NASDAQ:FIVE). Five Below, Inc. (NASDAQ:FIVE) is a US-based specialty value retailer. The one-month return of Five Below, Inc. (NASDAQ:FIVE) was -11.30%, and its shares lost 55.59% of their value over the last 52 weeks. On April 17, 2025, Five Below, Inc. (NASDAQ:FIVE) stock closed at $67.51 per share with a market capitalization of $3.716 billion.
Giverny Capital Asset Management stated the following regarding Five Below, Inc. (NASDAQ:FIVE) in its Q1 2025 investor letter:
“We also exited Five Below, Inc. (NASDAQ:FIVE), our lamented value retailer. Five Below has one of the better retail store models I have ever seen. Unfortunately, prior management decided to move away from a successful value proposition where all merchandise in the store was priced below $5, and to introduce higher-priced items. I wasn’t skeptical enough of this move. Customers walk into Five Below expecting to find fun and interesting low-priced items, not $20 roll-aboard suitcases. On a simple level, when you sell trendy $2 and $3 items to kids, there is not much competition. When you start selling $15 and $20 items to adults, you find yourself competing with Walmart and Target. That’s a harder game to play.
Five Below was also hurt by shoplifting losses after some cities stopped policing petty crime. CEO Joel Anderson left abruptly last summer and I waited to see who would replace him. Unfortunately, the new CEO previously led two retailers that ended up in bankruptcy shortly after her departure. In our research, she did not garner strong reviews from former colleagues. On top of this, it was clear to us that Five Below would be hurt by plans to heavily tax Chinese-made imports. We did not foresee the extreme level of tariffs that were announced, but we did suspect China would be hit hard. We exited at a terrible price but not as terrible as the current price: about $86 vs. recent quotes in the mid-$60s.”
A family happily shopping for everyday items in a specialty retail store.
Five Below, Inc. (NASDAQ:FIVE) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 48 hedge fund portfolios held Five Below, Inc. (NASDAQ:FIVE) at the end of the fourth quarter which was 36 in the previous quarter. 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.
We covered Five Below, Inc. (NASDAQ:FIVE) in another article, and shared the list of best department store stocks to invest in. In addition, please check out our hedge fund investor letters Q1 2025 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.