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Activist Tom Sandell Sends Letter to Ethan Allen Interiors Inc. (ETH) and Urges for Recapitalization or Sale of Company

Overall, smart money were not so keen on Ethan Allen Interiors Inc. (NYSE:ETH) at the end of March and Sandell’s involvement will most likely increase the stock’s popularity. We follow hedge fund activity that surrounds a stock because we determined that retail investors can benefit from their stock picking skills, despite the fact that hedge funds underperformed the market significantly for the last several years. It is especially useful to follow hedge funds’ small-cap ideas, because our research has shown that a portfolio of most popular small-cap stocks among hedge funds can annually beat the market by double digits. Our strategy, which is based on imitating a portfolio of 15 top small-cap picks among 700 funds, has returned 123% since August 2012, and outperformed the S&P 500 ETF (SPY) by as much as 65 percentage points (see more details here).

In this way, as it has been stated, hedge funds seem to be bullish on Ethan Allen Interiors Inc. (NYSE:ETH), taking into account that at the end of March, 14 funds held around $183.8 million worth of stock, representing around 23% of the company, which is not surprising for a small-cap stock. Moreover, during the first three months of 2015, the number of funds with long positions declined from 16 funds, which owned around $205.81 million in stock at the end of December. Aside from Sandell, which boosted its stake during the second quarter, another shareholder of Ethan Allen is Chuck Royce‘s Royce & Associates, which trimmed its position to 3.07 million shares reported in its latest 13F for the end of June. The same trend can be noticed by looking at 13F filings of Crispin Odey’s Odey Asset Management and Mario Gabelli’s GAMCO Investors, which cut their stakes to 1.80 million shares and 347,900 shares respectively.

Mr. Sandell is most likely to succeed in his endeavor to increase the value of Ethan Allen Interiors Inc. (NYSE:ETH) in one way or another. Taking into account that shareholders have been losing money in the last years, they will support Sandell, while other investors might also be interested in going long in the stock, betting on a positive outcome.

Disclosure: none

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