Were Hedge Funds Right About Five Below Inc (FIVE)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Five Below Inc (NASDAQ:FIVE) based on that data and determine whether they were really smart about the stock.

Is Five Below Inc (NASDAQ:FIVE) a buy right now? Prominent investors were getting less bullish. The number of long hedge fund bets were trimmed by 11 recently. Our calculations also showed that FIVE 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). FIVE was in 31 hedge funds’ portfolios at the end of the first quarter of 2020. There were 42 hedge funds in our database with FIVE holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are a multitude of metrics investors put to use to analyze publicly traded companies. A duo of the best metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best money managers can beat their index-focused peers by a superb amount (see the details here).

Clint Carlson of Carlson Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Keeping this in mind let’s go over the fresh hedge fund action surrounding Five Below Inc (NASDAQ:FIVE).

What have hedge funds been doing with Five Below Inc (NASDAQ:FIVE)?

At the end of the first quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from the previous quarter. On the other hand, there were a total of 38 hedge funds with a bullish position in FIVE a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Is FIVE A Good Stock To Buy?

The largest stake in Five Below Inc (NASDAQ:FIVE) was held by Citadel Investment Group, which reported holding $88.5 million worth of stock at the end of September. It was followed by Candlestick Capital Management with a $51.4 million position. Other investors bullish on the company included 12 West Capital Management, Rivulet Capital, and Junto Capital Management. In terms of the portfolio weights assigned to each position Pacifica Capital Investments allocated the biggest weight to Five Below Inc (NASDAQ:FIVE), around 14.68% of its 13F portfolio. Crestwood Capital Management is also relatively very bullish on the stock, designating 2.97 percent of its 13F equity portfolio to FIVE.

Because Five Below Inc (NASDAQ:FIVE) has faced a decline in interest from hedge fund managers, logic holds that there were a few fund managers that decided to sell off their full holdings by the end of the first quarter. At the top of the heap, Dan Loeb’s Third Point said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, worth an estimated $153.4 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dumped about $34.7 million worth. These transactions are interesting, as total hedge fund interest was cut by 11 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks similar to Five Below Inc (NASDAQ:FIVE). We will take a look at ICL Group Ltd. (NYSE:ICL), Curtiss-Wright Corp. (NYSE:CW), MSA Safety Incorporated (NYSE:MSA), and Coty Inc (NYSE:COTY). All of these 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
ICL 3 3107 -3
CW 21 256781 -1
MSA 11 26188 -4
COTY 33 183298 4
Average 17 117344 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $405 million in FIVE’s case. Coty Inc (NYSE:COTY) is the most popular stock in this table. On the other hand ICL Group Ltd. (NYSE:ICL) is the least popular one with only 3 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 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on FIVE as the stock returned 51.9% in Q2 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.