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Hedge Funds Have Never Been This Bullish On Five9 Inc (FIVN)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Five9 Inc (NASDAQ:FIVN) has seen an increase in support from the world’s most elite money managers lately. 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 below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

New York Stock Exchange

New York Stock Exchange

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the latest hedge fund action regarding Five9 Inc (NASDAQ:FIVN).

What have hedge funds been doing with Five9 Inc (NASDAQ:FIVN)?

At Q3’s end, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 35% from the second quarter of 2019. On the other hand, there were a total of 25 hedge funds with a bullish position in FIVN a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

FIVN_dec2019

More specifically, Sylebra Capital Management was the largest shareholder of Five9 Inc (NASDAQ:FIVN), with a stake worth $116.3 million reported as of the end of September. Trailing Sylebra Capital Management was Alkeon Capital Management, which amassed a stake valued at $106 million. Whale Rock Capital Management, Tremblant Capital, and Valinor Management 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 Alta Park Capital allocated the biggest weight to Five9 Inc (NASDAQ:FIVN), around 5.17% of its portfolio. Sylebra Capital Management is also relatively very bullish on the stock, setting aside 5.08 percent of its 13F equity portfolio to FIVN.

As industrywide interest jumped, specific money managers have jumped into Five9 Inc (NASDAQ:FIVN) headfirst. Whale Rock Capital Management, managed by Alex Sacerdote, assembled the biggest position in Five9 Inc (NASDAQ:FIVN). Whale Rock Capital Management had $56.6 million invested in the company at the end of the quarter. David Gallo’s Valinor Management also made a $36.3 million investment in the stock during the quarter. The other funds with new positions in the stock are David Fiszel’s Honeycomb Asset Management, Dennis Puri and Oliver Keller’s Hunt Lane Capital, and Michel Massoud’s Melqart Asset Management.

Let’s now review 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 AppFolio Inc (NASDAQ:APPF), Semtech Corporation (NASDAQ:SMTC), Balchem Corporation (NASDAQ:BCPC), and FibroGen Inc (NASDAQ:FGEN). This group of stocks’ market valuations are similar to FIVN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
APPF 11 211977 -1
SMTC 16 218316 -1
BCPC 7 56560 -2
FGEN 24 334669 8
Average 14.5 205381 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $205 million. That figure was $579 million in FIVN’s case. FibroGen Inc (NASDAQ:FGEN) is the most popular stock in this table. On the other hand Balchem Corporation (NASDAQ:BCPC) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Five9 Inc (NASDAQ:FIVN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on FIVN as the stock returned 26.9% during the first two months of Q4 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.

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

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