The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Five9 Inc (NASDAQ:FIVN) and determine whether the smart money was really smart about this stock.
Is Five9 Inc (NASDAQ:FIVN) the right investment to pursue these days? Money managers were getting more bullish. The number of bullish hedge fund positions went up by 11 in recent months. Five9 Inc (NASDAQ:FIVN) was in 44 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FIVN isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we’re going to go over the new hedge fund action regarding Five9 Inc (NASDAQ:FIVN).
How have hedgies been trading Five9 Inc (NASDAQ:FIVN)?
At the end of June, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards FIVN over the last 20 quarters. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Panayotis Takis Sparaggis’s Alkeon Capital Management has the largest position in Five9 Inc (NASDAQ:FIVN), worth close to $255.8 million, accounting for 0.6% of its total 13F portfolio. Sitting at the No. 2 spot is Whale Rock Capital Management, managed by Alex Sacerdote, which holds a $235.7 million position; 1.9% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism contain Amish Mehta’s SQN Investors, Israel Englander’s Millennium Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position SQN Investors allocated the biggest weight to Five9 Inc (NASDAQ:FIVN), around 7.15% of its 13F portfolio. Alta Park Capital is also relatively very bullish on the stock, earmarking 4.93 percent of its 13F equity portfolio to FIVN.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Five9 Inc (NASDAQ:FIVN) headfirst. Millennium Management, managed by Israel Englander, initiated the biggest position in Five9 Inc (NASDAQ:FIVN). Millennium Management had $59.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $45.3 million position during the quarter. The following funds were also among the new FIVN investors: Brandon Haley’s Holocene Advisors, James Parsons’s Junto Capital Management, and Blair Baker’s Precept Capital Management.
Let’s now take a look at 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 Chemed Corporation (NYSE:CHE), Arch Coal Inc (NYSE:ACI), Ascendis Pharma A/S (NASDAQ:ASND), JOYY Inc. (NASDAQ:YY), Nuance Communications Inc. (NASDAQ:NUAN), The Toro Company (NYSE:TTC), and Lincoln National Corporation (NYSE:LNC). This group of stocks’ market values resemble FIVN’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $1321 million. That figure was $1130 million in FIVN’s case. Nuance Communications Inc. (NASDAQ:NUAN) is the most popular stock in this table. On the other hand Chemed Corporation (NYSE:CHE) is the least popular one with only 26 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 90. 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 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on FIVN, though not to the same extent, as the stock returned 15.2% since the end of June and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.