Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Five Below Inc (NASDAQ:FIVE).
Is FIVE a good stock to buy now? The best stock pickers were in an optimistic mood. The number of long hedge fund positions improved by 2 in recent months. Five Below Inc (NASDAQ:FIVE) was in 44 hedge funds’ portfolios at the end of September. The all time high for this statistic is 42. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FIVE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Richard Chilton of Chilton Investment Company
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Now we’re going to view the key hedge fund action surrounding Five Below Inc (NASDAQ:FIVE).
Do Hedge Funds Think FIVE Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. On the other hand, there were a total of 37 hedge funds with a bullish position in FIVE a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Suvretta Capital Management was the largest shareholder of Five Below Inc (NASDAQ:FIVE), with a stake worth $131.9 million reported as of the end of September. Trailing Suvretta Capital Management was Citadel Investment Group, which amassed a stake valued at $96.2 million. Tremblant Capital, Chilton Investment Company, and Millennium Management 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 21.77% of its 13F portfolio. Crestwood Capital Management is also relatively very bullish on the stock, dishing out 5.18 percent of its 13F equity portfolio to FIVE.
As industrywide interest jumped, specific money managers have been driving this bullishness. Columbus Circle Investors, managed by Principal Global Investors, assembled the largest position in Five Below Inc (NASDAQ:FIVE). Columbus Circle Investors had $18.4 million invested in the company at the end of the quarter. James Dinan’s York Capital Management also initiated a $15.2 million position during the quarter. The following funds were also among the new FIVE investors: Yen Liow’s Aravt Global, Elise Di Vincenzo Crumbine’s Stormborn Capital Management, and Warren Lammert’s Granite Point Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Five Below Inc (NASDAQ:FIVE) but similarly valued. We will take a look at Globant SA (NYSE:GLOB), Williams-Sonoma, Inc. (NYSE:WSM), Penumbra Inc (NYSE:PEN), First Solar, Inc. (NASDAQ:FSLR), Vereit Inc (NYSE:VER), Cree, Inc. (NASDAQ:CREE), and AMERCO (NASDAQ:UHAL). This group of stocks’ market valuations are similar to FIVE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLOB | 21 | 251317 | 4 |
| WSM | 31 | 455487 | 4 |
| PEN | 23 | 286645 | 3 |
| FSLR | 40 | 283671 | 24 |
| VER | 18 | 543958 | -5 |
| CREE | 30 | 650447 | 13 |
| UHAL | 19 | 437403 | -1 |
| Average | 26 | 415561 | 6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $416 million. That figure was $831 million in FIVE’s case. First Solar, Inc. (NASDAQ:FSLR) is the most popular stock in this table. On the other hand Vereit Inc (NYSE:VER) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Five Below Inc (NASDAQ:FIVE) is more popular among hedge funds. Our overall hedge fund sentiment score for FIVE is 87. 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. 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 percentage points. These stocks returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on FIVE as the stock returned 29.9% since the end of September (through 12/8) 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.
Follow Five Below Inc (NASDAQ:FIVE)
Follow Five Below Inc (NASDAQ:FIVE)
Disclosure: None. This article was originally published at Insider Monkey.
