At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data weve gathered as a result gives us access to a wealth of collective knowledge based on these firms portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Etsy Inc (NASDAQ:ETSY) makes for a good investment right now.
Is ETSY a good stock to buy now? Hedge funds were becoming hopeful. The number of bullish hedge fund positions went up by 8 recently. Etsy Inc (NASDAQ:ETSY) was in 51 hedge funds portfolios at the end of September. The all time high for this statistics is 49. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ETSY isnt among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldnt keep up with the unhedged returns of the market indices. Our research has shown that hedge funds small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 website. With all of this in mind lets take a gander at the latest hedge fund action regarding Etsy Inc (NASDAQ:ETSY).
How have hedgies been trading Etsy Inc (NASDAQ:ETSY)?
At the end of September, a total of 51 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ETSY over the last 21 quarters. So, lets find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Etsy Inc (NASDAQ:ETSY) was held by Renaissance Technologies, which reported holding $448.6 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $271 million position. Other investors bullish on the company included HMI Capital, Cadian Capital, and D E Shaw. In terms of the portfolio weights assigned to each position Goodnow Investment Group allocated the biggest weight to Etsy Inc (NASDAQ:ETSY), around 13.29% of its 13F portfolio. Half Sky Capital is also relatively very bullish on the stock, earmarking 13.06 percent of its 13F equity portfolio to ETSY.
With a general bullishness amongst the heavyweights, some big names were leading the bulls herd. HMI Capital, managed by Mick Hellman, assembled the largest position in Etsy Inc (NASDAQ:ETSY). HMI Capital had $165.6 million invested in the company at the end of the quarter. Mark Moores ThornTree Capital Partners also made a $38.6 million investment in the stock during the quarter. The following funds were also among the new ETSY investors: James Crichtons Hitchwood Capital Management, Christopher Weldons Stamina Capital Management, and Matthew Hulsizers PEAK6 Capital Management.
Lets check out hedge fund activity in other stocks similar to Etsy Inc (NASDAQ:ETSY). These stocks are Quest Diagnostics Incorporated (NYSE:DGX), Slack Technologies Inc (NYSE:WORK), EXACT Sciences Corporation (NASDAQ:EXAS), Bio-Rad Laboratories, Inc. (NYSE:BIO), Synchrony Financial (NYSE:SYF), XPeng Inc. (NYSE:XPEV), and DISH Network Corp. (NASDAQ:DISH). All of these stocks market caps are similar to ETSYs market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DGX,42,412437,-4 WORK,20,164700,-12 EXAS,34,1113307,-9 BIO,48,1164966,-6 SYF,46,1962420,0 XPEV,26,214330,26 DISH,60,1594539,6 Average,39.4,946671,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.4 hedge funds with bullish positions and the average amount invested in these stocks was $947 million. That figure was $1900 million in ETSYs case. DISH Network Corp. (NASDAQ:DISH) is the most popular stock in this table. On the other hand Slack Technologies Inc (NYSE:WORK) is the least popular one with only 20 bullish hedge fund positions. Etsy Inc (NASDAQ:ETSY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ETSY is 78.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on ETSY as the stock returned 27.1% since the end of Q3 (through 12/2) 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.