In this article we will take a look at whether hedge funds think Five9 Inc (NASDAQ:FIVN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Five9 Inc (NASDAQ:FIVN) a buy here? Money managers are getting less optimistic. The number of bullish hedge fund bets were trimmed by 2 lately. Our calculations also showed that FIVN 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). FIVN was in 33 hedge funds’ portfolios at the end of the first quarter of 2020. There were 35 hedge funds in our database with FIVN positions at the end of the previous quarter.
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 51 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 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 regarding Five9 Inc (NASDAQ:FIVN).
What have hedge funds been doing with Five9 Inc (NASDAQ:FIVN)?
At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in FIVN over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably (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 biggest position in Five9 Inc (NASDAQ:FIVN). Alkeon Capital Management has a $176.8 million position in the stock, comprising 0.8% of its 13F portfolio. Coming in second is Sylebra Capital Management, led by Daniel Patrick Gibson, holding a $136.1 million position; the fund has 5.6% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism consist of Alex Sacerdote’s Whale Rock Capital Management, Glen Kacher’s Light Street Capital and Amish Mehta’s SQN Investors. In terms of the portfolio weights assigned to each position Alta Park Capital allocated the biggest weight to Five9 Inc (NASDAQ:FIVN), around 7.04% of its 13F portfolio. Sylebra Capital Management is also relatively very bullish on the stock, dishing out 5.57 percent of its 13F equity portfolio to FIVN.
Judging by the fact that Five9 Inc (NASDAQ:FIVN) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of funds who were dropping their entire stakes by the end of the third quarter. It’s worth mentioning that Brett Barakett’s Tremblant Capital dropped the largest position of the “upper crust” of funds tracked by Insider Monkey, totaling about $77.7 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dumped about $10.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.
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 Columbia Sportswear Company (NASDAQ:COLM), Hawaiian Electric Industries, Inc. (NYSE:HE), Rexford Industrial Realty Inc (NYSE:REXR), and Trex Company, Inc. (NYSE:TREX). This group of stocks’ market values are closest to 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 15 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $716 million in FIVN’s case. Trex Company, Inc. (NYSE:TREX) is the most popular stock in this table. On the other hand Hawaiian Electric Industries, Inc. (NYSE:HE) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Five9 Inc (NASDAQ:FIVN) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on FIVN as the stock returned 36.3% so far in Q2 (through the end of May) 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.