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Here’s What Hedge Funds Think About Five9 Inc (FIVN)

Before we spend countless hours researching a company, we’d like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Five9 Inc (NASDAQ:FIVN).

Five9 Inc (NASDAQ:FIVN) investors should pay attention to a decrease in hedge fund sentiment of late. FIVN was in 25 hedge funds’ portfolios at the end of March. There were 28 hedge funds in our database with FIVN positions at the end of the previous quarter. Our calculations also showed that FIVN isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny

Let’s take a look at the recent hedge fund action encompassing Five9 Inc (NASDAQ:FIVN).

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

At Q1’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in FIVN a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

FIVN_june2019

The largest stake in Five9 Inc (NASDAQ:FIVN) was held by Sylebra Capital Management, which reported holding $108.3 million worth of stock at the end of March. It was followed by Alkeon Capital Management with a $104.8 million position. Other investors bullish on the company included Renaissance Technologies, Tremblant Capital, and Polar Capital.

Since Five9 Inc (NASDAQ:FIVN) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of funds that slashed their positions entirely heading into Q3. It’s worth mentioning that Bruce Garelick’s Garelick Capital Partners sold off the biggest stake of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $9 million in stock, and Ravee Mehta’s Nishkama Capital was right behind this move, as the fund said goodbye to about $3.1 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 3 funds heading into Q3.

Let’s check out hedge fund activity in other stocks similar to Five9 Inc (NASDAQ:FIVN). We will take a look at Alarm.com Holdings Inc (NASDAQ:ALRM), Domtar Corporation (NYSE:UFS), Mercury Systems Inc (NASDAQ:MRCY), and FirstService Corporation (NASDAQ:FSV). This group of stocks’ market caps are closest to FIVN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALRM 16 218728 1
UFS 19 178842 -6
MRCY 15 58014 9
FSV 11 144724 -2
Average 15.25 150077 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $150 million. That figure was $524 million in FIVN’s case. Domtar Corporation (NYSE:UFS) is the most popular stock in this table. On the other hand FirstService Corporation (NASDAQ:FSV) is the least popular one with only 11 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately FIVN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FIVN were disappointed as the stock returned -1.5% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.

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

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