Hedge Funds Are Souring On Five Below Inc (FIVE)

·5 min read

Before we spend countless hours researching a company, we 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 Five Below Inc (NASDAQ:FIVE).

Five Below Inc (NASDAQ:FIVE) has experienced a decrease in hedge fund sentiment of late. Five Below Inc (NASDAQ:FIVE) was in 40 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 44. There were 42 hedge funds in our database with FIVE holdings at the end of June. Our calculations also showed that FIVE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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 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. Keeping this in mind let's review the fresh hedge fund action encompassing Five Below Inc (NASDAQ:FIVE).


Richard Chilton of Chilton Investment Company

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

Heading into the fourth quarter of 2021, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in FIVE over the last 25 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Among these funds, Arrowstreet Capital held the most valuable stake in Five Below Inc (NASDAQ:FIVE), which was worth $92 million at the end of the third quarter. On the second spot was Balyasny Asset Management which amassed $90.6 million worth of shares. Chilton Investment Company, Tremblant Capital, and Armistice Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Pacifica Capital Investments allocated the biggest weight to Five Below Inc (NASDAQ:FIVE), around 20.21% of its 13F portfolio. Aravt Global is also relatively very bullish on the stock, designating 8.66 percent of its 13F equity portfolio to FIVE.

Judging by the fact that Five Below Inc (NASDAQ:FIVE) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of money managers who were dropping their positions entirely heading into Q4. It's worth mentioning that Renaissance Technologies dumped the largest investment of the 750 funds watched by Insider Monkey, comprising close to $47 million in stock, and John Overdeck and David Siegel's Two Sigma Advisors was right behind this move, as the fund cut about $8.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds heading into Q4.

Let's now review hedge fund activity in other stocks similar to Five Below Inc (NASDAQ:FIVE). We will take a look at Cleveland-Cliffs Inc (NYSE:CLF), Norwegian Cruise Line Holdings Ltd (NYSE:NCLH), Guidewire Software Inc (NYSE:GWRE), Hill-Rom Holdings, Inc. (NYSE:HRC), Intellia Therapeutics, Inc. (NASDAQ:NTLA), Levi Strauss & Co. (NYSE:LEVI), and Chegg Inc (NYSE:CHGG). All of these stocks' market caps are closest to FIVE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLF,35,682055,-9 NCLH,36,502017,-7 GWRE,26,2005849,-1 HRC,46,1410210,24 NTLA,37,1620289,-4 LEVI,26,225120,-4 CHGG,39,514158,1 Average,35,994243,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $994 million. That figure was $996 million in FIVE's case. Hill-Rom Holdings, Inc. (NYSE:HRC) is the most popular stock in this table. On the other hand Guidewire Software Inc (NYSE:GWRE) 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 65.3. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on FIVE as the stock returned 15.1% since the end of Q3 (through 11/30) 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.

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