Were Hedge Funds Illusioned With Five Below Inc (FIVE)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought Five Below Inc (NASDAQ:FIVE) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.

Five Below Inc (NASDAQ:FIVE) investors should pay attention to a decrease in support from the world’s most elite money managers recently. Five Below Inc (NASDAQ:FIVE) was in 40 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 44. Our calculations also showed that FIVE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind let’s take a glance at the recent hedge fund action encompassing Five Below Inc (NASDAQ:FIVE).

Richard Chilton of Chilton Investment Company

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

At the end of the third quarter, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the second quarter of 2021. By comparison, 44 hedge funds held shares or bullish call options in FIVE a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the number one position in Five Below Inc (NASDAQ:FIVE), worth close to $92 million, corresponding to 0.1% of its total 13F portfolio. The second most bullish fund manager is Dmitry Balyasny of Balyasny Asset Management, with a $90.6 million position; 0.4% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism comprise Richard Chilton’s Chilton Investment Company, Brett Barakett’s Tremblant Capital and Steven Boyd’s Armistice Capital. In terms of the portfolio weights assigned to each position Pacifica Capital Investments allocated the biggest weight to Five Below Inc (NASDAQ:FIVE), around 20.21% of its 13F portfolio. Aravt Global is also relatively very bullish on the stock, earmarking 8.66 percent of its 13F equity portfolio to FIVE.

Because Five Below Inc (NASDAQ:FIVE) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of funds that decided to sell off their full holdings by the end of the third quarter. Intriguingly, Renaissance Technologies cut the largest position of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $47 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund dumped about $8.9 million worth. These transactions are important to note, as total hedge fund interest dropped by 2 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Five Below Inc (NASDAQ:FIVE) but similarly valued. These stocks are Cleveland-Cliffs Inc (NYSE:CLF), Norwegian Cruise Line Holdings Ltd (NYSE:NCLH), Guidewire Software Inc (NYSE:GWRE), Hill-Rom Holdings, Inc. (NYSE:HRC), Intellia Therapeutics, Inc. (NASDAQ:NTLA), Levi Strauss & Co. (NYSE:LEVI), and Chegg Inc (NYSE:CHGG). This group of stocks’ market caps match FIVE’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $994 million. That figure was $996 million in FIVE’s case. Hill-Rom Holdings, Inc. (NYSE:HRC) is the most popular stock in this table. On the other hand Guidewire Software Inc (NYSE:GWRE) is the least popular one with only 26 bullish hedge fund positions. Five Below Inc (NASDAQ:FIVE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FIVE is 65.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 and beat the market again by 3.6 percentage points. Unfortunately, FIVE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FIVE were disappointed as the stock returned -7.2% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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