Is FIVN A Good Stock To Buy Now?

In this article we are going to use hedge fund sentiment as a tool and determine whether Five9 Inc (NASDAQ:FIVN) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is FIVN a good stock to buy now? Five9 Inc (NASDAQ:FIVN) investors should pay attention to an increase in support from the world’s most elite money managers recently. Five9 Inc (NASDAQ:FIVN) was in 47 hedge funds’ portfolios at the end of September. The all time high for this statistic is 44. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 44 hedge funds in our database with FIVN positions at the end of the second quarter. Our calculations also showed that FIVN 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.

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. 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 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.

Steven Cohen of Point72 Asset Management

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 cannabis tech 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. With all of this in mind we’re going to take a glance at the new hedge fund action regarding Five9 Inc (NASDAQ:FIVN).

Do Hedge Funds Think FIVN Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FIVN over the last 21 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, Whale Rock Capital Management held the most valuable stake in Five9 Inc (NASDAQ:FIVN), which was worth $359.7 million at the end of the third quarter. On the second spot was Alkeon Capital Management which amassed $351.7 million worth of shares. SQN Investors, SCGE Management, and Holocene Advisors 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 Calixto Global Investors allocated the biggest weight to Five9 Inc (NASDAQ:FIVN), around 8.33% of its 13F portfolio. SQN Investors is also relatively very bullish on the stock, dishing out 7.22 percent of its 13F equity portfolio to FIVN.

As one would reasonably expect, key hedge funds have jumped into Five9 Inc (NASDAQ:FIVN) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the biggest position in Five9 Inc (NASDAQ:FIVN). Point72 Asset Management had $33.1 million invested in the company at the end of the quarter. Mark Moore’s ThornTree Capital Partners also initiated a $26.2 million position during the quarter. The other funds with new positions in the stock are Michel Massoud’s Melqart Asset Management, Phill Gross and Robert Atchinson’s Adage Capital Management, and David Fiszel’s Honeycomb Asset Management.

Let’s now take a look at hedge fund activity in other stocks similar to Five9 Inc (NASDAQ:FIVN). These stocks are LKQ Corporation (NASDAQ:LKQ), NiSource Inc. (NYSE:NI), Formula One Group (NASDAQ:FWONK), Henry Schein, Inc. (NASDAQ:HSIC), Pinnacle West Capital Corporation (NYSE:PNW), China Southern Airlines Co Ltd (NYSE:ZNH), and Formula One Group (NASDAQ:FWONA). This group of stocks’ market caps resemble FIVN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $723 million. That figure was $1328 million in FIVN’s case. LKQ Corporation (NASDAQ:LKQ) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 3 bullish hedge fund positions. Five9 Inc (NASDAQ:FIVN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FIVN is 83.8. 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 gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on FIVN as the stock returned 16.6% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.