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Was The Smart Money Right About Five Below Inc (FIVE)?

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  • FIVE
  • ^GSPC

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 second 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 6 years and analyze what the smart money thinks of Five Below Inc (NASDAQ:FIVE) based on that data.

Is Five Below Inc (NASDAQ:FIVE) going to take off soon? Prominent investors were getting less optimistic. The number of bullish hedge fund positions retreated by 1 recently. Five Below Inc (NASDAQ:FIVE) was in 42 hedge funds' portfolios at the end of June. The all time high for this statistic is 44. Our calculations also showed that FIVE isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 43 hedge funds in our database with FIVE holdings at the end of March.

In the eyes of most market participants, hedge funds are seen as underperforming, outdated financial tools of yesteryear. While there are more than 8000 funds with their doors open at the moment, Our researchers look at the bigwigs of this club, about 850 funds. These hedge fund managers handle bulk of the hedge fund industry's total asset base, and by shadowing their top investments, Insider Monkey has brought to light several investment strategies that have historically beaten the broader indices. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Steve Leonard Pacifica Capital
Steve Leonard Pacifica Capital

Steve Leonard of Pacifica Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we're going to go over the new hedge fund action surrounding Five Below Inc (NASDAQ:FIVE).

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

Heading into the third quarter of 2021, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from the previous quarter. By comparison, 42 hedge funds held shares or bullish call options in FIVE a year ago. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the most valuable position in Five Below Inc (NASDAQ:FIVE). Arrowstreet Capital has a $94 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Chilton Investment Company, led by Richard Chilton, holding a $88.6 million position; 2.2% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions include Ken Griffin's Citadel Investment Group, Brett Barakett's Tremblant Capital and Steve Leonard's Pacifica Capital Investments. In terms of the portfolio weights assigned to each position Pacifica Capital Investments allocated the biggest weight to Five Below Inc (NASDAQ:FIVE), around 21.37% of its 13F portfolio. Aravt Global is also relatively very bullish on the stock, setting aside 8.38 percent of its 13F equity portfolio to FIVE.

Seeing as Five Below Inc (NASDAQ:FIVE) has witnessed declining sentiment from hedge fund managers, it's easy to see that there were a few hedgies who sold off their full holdings heading into Q3. It's worth mentioning that Louis Bacon's Moore Global Investments said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, comprising close to $23.8 million in stock. Steven Boyd's fund, Armistice Capital, also said goodbye to its stock, about $12.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q3.

Let's also examine hedge fund activity in other stocks similar to Five Below Inc (NASDAQ:FIVE). These stocks are LPL Financial Holdings Inc (NASDAQ:LPLA), Gaming and Leisure Properties Inc (NASDAQ:GLPI), Jazz Pharmaceuticals Plc (NASDAQ:JAZZ), Cleveland-Cliffs Inc (NYSE:CLF), Maravai LifeSciences Holdings, Inc. (NASDAQ:MRVI), Marathon Oil Corporation (NYSE:MRO), and PRA Health Sciences Inc (NASDAQ:PRAH). All of these stocks' market caps resemble FIVE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LPLA,48,1500930,10 GLPI,27,515879,-1 JAZZ,34,1493732,-3 CLF,44,1111037,8 MRVI,20,572985,-6 MRO,34,655729,5 PRAH,43,2995527,8 Average,35.7,1263688,3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.7 hedge funds with bullish positions and the average amount invested in these stocks was $1264 million. That figure was $783 million in FIVE's case. LPL Financial Holdings Inc (NASDAQ:LPLA) is the most popular stock in this table. On the other hand Maravai LifeSciences Holdings, Inc. (NASDAQ:MRVI) is the least popular one with only 20 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 71.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Hedge funds were also right about betting on FIVE as the stock returned 8.7% since the end of Q2 (through 11/5) 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.