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Hedge Funds Are Dumping Five Below Inc (FIVE)

In this article we will check out the progression of hedge fund sentiment towards Five Below Inc (NASDAQ:FIVE) 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 Five Below Inc (NASDAQ:FIVE) ready to rally soon? Hedge funds are getting less bullish. The number of bullish hedge fund bets fell by 11 lately. Our calculations also showed that FIVE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). FIVE was in 31 hedge funds’ portfolios at the end of March. There were 42 hedge funds in our database with FIVE positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are plenty of tools stock market investors employ to evaluate their stock investments. A pair of the most underrated 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 very impressive margin (see the details here).

Third Point

Dan Loeb of Third Point

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the fresh hedge fund action encompassing Five Below Inc (NASDAQ:FIVE).

What have hedge funds been doing with Five Below Inc (NASDAQ:FIVE)?

At the end of the first quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FIVE over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Is FIVE A Good Stock To Buy?

The largest stake in Five Below Inc (NASDAQ:FIVE) was held by Citadel Investment Group, which reported holding $88.5 million worth of stock at the end of September. It was followed by Candlestick Capital Management with a $51.4 million position. Other investors bullish on the company included 12 West Capital Management, Rivulet Capital, and Junto Capital Management. In terms of the portfolio weights assigned to each position Pacifica Capital Investments allocated the biggest weight to Five Below Inc (NASDAQ:FIVE), around 14.68% of its 13F portfolio. Crestwood Capital Management is also relatively very bullish on the stock, designating 2.97 percent of its 13F equity portfolio to FIVE.

Due to the fact that Five Below Inc (NASDAQ:FIVE) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few money managers that decided to sell off their entire stakes last quarter. It’s worth mentioning that Dan Loeb’s Third Point cut the biggest position of all the hedgies monitored by Insider Monkey, comprising close to $153.4 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $34.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 11 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Five Below Inc (NASDAQ:FIVE). These stocks are Israel Chemicals Ltd. (NYSE:ICL), Curtiss-Wright Corp. (NYSE:CW), MSA Safety Incorporated (NYSE:MSA), and Coty Inc (NYSE:COTY). This group of stocks’ market values match FIVE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ICL 3 3107 -3
CW 21 256781 -1
MSA 11 26188 -4
COTY 33 183298 4
Average 17 117344 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $405 million in FIVE’s case. Coty Inc (NYSE:COTY) is the most popular stock in this table. On the other hand Israel Chemicals Ltd. (NYSE:ICL) is the least popular one with only 3 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 calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on FIVE as the stock returned 48.7% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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