Is FIVE Stock A Buy or Sell?

With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was Five Below Inc (NASDAQ:FIVE).

Is FIVE stock a buy or sell? Five Below Inc (NASDAQ:FIVE) was in 42 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 44. FIVE investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. There were 44 hedge funds in our database with FIVE positions at the end of the third quarter. Our calculations also showed that FIVE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the 21st century investor’s toolkit there are a multitude of metrics shareholders have at their disposal to analyze publicly traded companies. Two of the most underrated metrics are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite fund managers can outpace the S&P 500 by a healthy amount (see the details here).

Aaron Cowen Suvretta Capital

Aaron Cowen of Suvretta Capital Management

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Do Hedge Funds Think FIVE Is A Good Stock To Buy Now?

At Q4’s end, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FIVE over the last 22 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes 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 Suvretta Capital Management, which reported holding $181.6 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $115.7 million position. Other investors bullish on the company included Chilton Investment Company, Pacifica Capital Investments, and Interval Partners. In terms of the portfolio weights assigned to each position Pacifica Capital Investments allocated the biggest weight to Five Below Inc (NASDAQ:FIVE), around 23.51% of its 13F portfolio. Crestwood Capital Management is also relatively very bullish on the stock, setting aside 6.31 percent of its 13F equity portfolio to FIVE.

Seeing as Five Below Inc (NASDAQ:FIVE) has faced falling interest from hedge fund managers, it’s easy to see that there was a specific group of hedgies who were dropping their positions entirely by the end of the fourth quarter. At the top of the heap, Phill Gross and Robert Atchinson’s Adage Capital Management said goodbye to the largest position of all the hedgies watched by Insider Monkey, comprising close to $38.1 million in stock. Robert Pitts’s fund, Steadfast Capital Management, also cut its stock, about $12.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the fourth quarter.

Let’s go over hedge fund activity in other stocks similar to Five Below Inc (NASDAQ:FIVE). We will take a look at Aramark (NYSE:ARMK), Formula One Group (NASDAQ:FWONK), Camden Property Trust (NYSE:CPT), Lincoln National Corporation (NYSE:LNC), Trex Company, Inc. (NYSE:TREX), Floor & Decor Holdings, Inc. (NYSE:FND), and Teck Resources Ltd (NYSE:TECK). This group of stocks’ market caps are closest to FIVE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARMK 33 1422317 -7
FWONK 42 1724356 2
CPT 26 510604 1
LNC 36 708675 6
TREX 30 314067 4
FND 31 1027190 -11
TECK 31 798049 4
Average 32.7 929323 -0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.7 hedge funds with bullish positions and the average amount invested in these stocks was $929 million. That figure was $997 million in FIVE’s case. Formula One Group (NASDAQ:FWONK) is the most popular stock in this table. On the other hand Camden Property Trust (NYSE:CPT) is the least popular one with only 26 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 overall hedge fund sentiment score for FIVE is 81.6. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on FIVE as the stock returned 12.4% since the end of Q4 (through 3/19) 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.