In this article we will check out the progression of hedge fund sentiment towards Five9 Inc (NASDAQ:FIVN) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is FIVN a good stock to buy? Money managers were in a pessimistic mood. The number of long hedge fund positions were cut by 2 in recent months. Five9 Inc (NASDAQ:FIVN) was in 45 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 47. Our calculations also showed that FIVN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
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. With all of this in mind we’re going to analyze the key hedge fund action regarding Five9 Inc (NASDAQ:FIVN).
Do Hedge Funds Think FIVN Is A Good Stock To Buy Now?
At the end of March, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FIVN over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Alkeon Capital Management, managed by Panayotis Takis Sparaggis, holds the biggest position in Five9 Inc (NASDAQ:FIVN). Alkeon Capital Management has a $473.5 million position in the stock, comprising 0.7% of its 13F portfolio. Coming in second is Whale Rock Capital Management, managed by Alex Sacerdote, which holds a $382.1 million position; the fund has 3.1% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism contain Amish Mehta’s SQN Investors, Steve Cohen’s Point72 Asset Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position SQN Investors allocated the biggest weight to Five9 Inc (NASDAQ:FIVN), around 7.5% of its 13F portfolio. Calixto Global Investors is also relatively very bullish on the stock, dishing out 7.18 percent of its 13F equity portfolio to FIVN.
Because Five9 Inc (NASDAQ:FIVN) has experienced bearish sentiment from the smart money, logic holds that there exists a select few money managers who were dropping their positions entirely last quarter. Interestingly, Mark Moore’s ThornTree Capital Partners said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, totaling close to $24.2 million in stock. Principal Global Investors’s fund, Columbus Circle Investors, also cut its stock, about $10.7 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Five9 Inc (NASDAQ:FIVN) but similarly valued. We will take a look at Lithia Motors Inc (NYSE:LAD), East West Bancorp, Inc. (NASDAQ:EWBC), Bright Horizons Family Solutions Inc (NYSE:BFAM), ICON Public Limited Company (NASDAQ:ICLR), Pentair plc (NYSE:PNR), Molson Coors Beverage Company (NYSE:TAP), and MKS Instruments, Inc. (NASDAQ:MKSI). All of these stocks’ market caps resemble FIVN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LAD | 40 | 2316536 | 1 |
| EWBC | 25 | 467070 | 1 |
| BFAM | 18 | 78337 | -2 |
| ICLR | 29 | 731050 | 0 |
| PNR | 30 | 775268 | 1 |
| TAP | 34 | 341099 | -5 |
| MKSI | 22 | 512507 | -5 |
| Average | 28.3 | 745981 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.3 hedge funds with bullish positions and the average amount invested in these stocks was $746 million. That figure was $1642 million in FIVN’s case. Lithia Motors Inc (NYSE:LAD) is the most popular stock in this table. On the other hand Bright Horizons Family Solutions Inc (NYSE:BFAM) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Five9 Inc (NASDAQ:FIVN) is more popular among hedge funds. Our overall hedge fund sentiment score for FIVN is 81.7. 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 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 returned 17.4% in 2021 through June 18th but still managed to beat the market by 6.1 percentage points. Hedge funds were also right about betting on FIVN as the stock returned 17.3% since the end of March (through 6/18) 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.
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Disclosure: None. This article was originally published at Insider Monkey.
