Was The Smart Money Right About Five9 Inc (FIVN)?

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 Five9 Inc (NASDAQ:FIVN).

Five9 Inc (NASDAQ:FIVN) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 45 hedge funds’ portfolios at the end of the second quarter of 2021. Our calculations also showed that FIVN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare FIVN to other stocks including CRISPR Therapeutics AG (NASDAQ:CRSP), Teck Resources Ltd (NYSE:TECK), and Iron Mountain Incorporated (NYSE:IRM) to get a better sense of its popularity.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Alex Sacerdote of Whale Rock Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. Keeping this in mind let’s take a look at the new hedge fund action surrounding Five9 Inc (NASDAQ:FIVN).

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

Heading into the third quarter of 2021, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards FIVN over the last 24 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Alkeon Capital Management, managed by Panayotis Takis Sparaggis, holds the largest position in Five9 Inc (NASDAQ:FIVN). Alkeon Capital Management has a $553.7 million position in the stock, comprising 0.8% of its 13F portfolio. Sitting at the No. 2 spot is Alex Sacerdote of Whale Rock Capital Management, with a $523.2 million position; the fund has 3.4% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism comprise Amish Mehta’s SQN Investors, Steve Cohen’s Point72 Asset Management and Christopher Lyle’s SCGE Management. In terms of the portfolio weights assigned to each position Calixto Global Investors allocated the biggest weight to Five9 Inc (NASDAQ:FIVN), around 11.52% of its 13F portfolio. SQN Investors is also relatively very bullish on the stock, setting aside 8.96 percent of its 13F equity portfolio to FIVN.

Due to the fact that Five9 Inc (NASDAQ:FIVN) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few funds that elected to cut their positions entirely last quarter. Intriguingly, Chuck Royce’s Royce & Associates sold off the largest stake of all the hedgies monitored by Insider Monkey, worth an estimated $6.7 million in stock. Sheetal Sharma’s fund, Collaborative Holdings Management, also said goodbye to its stock, about $4.3 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Five9 Inc (NASDAQ:FIVN). We will take a look at CRISPR Therapeutics AG (NASDAQ:CRSP), Teck Resources Ltd (NYSE:TECK), Iron Mountain Incorporated (NYSE:IRM), InterContinental Hotels Group PLC (NYSE:IHG), Black Knight, Inc. (NYSE:BKI), Ozon Holdings PLC (NASDAQ:OZON), and Dr. Reddy’s Laboratories Limited (NYSE:RDY). This group of stocks’ market valuations are similar to FIVN’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $644 million. That figure was $2151 million in FIVN’s case. Teck Resources Ltd (NYSE:TECK) is the most popular stock in this table. On the other hand InterContinental Hotels Group PLC (NYSE:IHG) is the least popular one with only 6 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 83.7. 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 gained 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Unfortunately FIVN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FIVN were disappointed as the stock returned -19.3% since the end of the second quarter (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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