Disappointing Results Led Polen U.S SMID Company Growth Strategy to Sell Etsy (ETSY)

Polen Capital, an investment management company, released its “Polen US SMID Company Growth Strategy” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. The initial market optimism after the Presidential election gave way to fear and uncertainty in the first quarter of 2025. Against this backdrop, the fund returned -12.38% gross, and -12.65% net of fees compared to the Russell 2500 Growth Index return of -10.80%. In addition, you can check the fund’s top 5 holdings to find out its best picks for 2025.

In its first-quarter 2025 investor letter, Polen US SMID Company Growth Strategy highlighted stocks such as Etsy, Inc. (NASDAQ:ETSY). Etsy, Inc. (NASDAQ:ETSY) is a two-sided online marketplace that connects buyers and sellers. The one-month return of Etsy, Inc. (NASDAQ:ETSY) was 35.94%, and its shares lost 2.25% of their value over the last 52 weeks.  On June 6, 2025, Etsy, Inc. (NASDAQ:ETSY) stock closed at $63.81 per share, with a market capitalization of $6.654 billion.

Polen US SMID Company Growth Strategy stated the following regarding Etsy, Inc. (NASDAQ:ETSY) in its Q1 2025 investor letter:

“We fully sold our position inEtsy, Inc. (NASDAQ:ETSY), an online marketplace for handmade goods, after disappointing Q4 results and a weak 2025 outlook. While the business is extremely high-quality, we’ve been disappointed by its growth. The platform fails to attract new buyers, and existing buyers are spending less. While we believe some may be macro-related, we are incrementally cautious on consumer discretionary spending as it has not recovered as we hoped. Etsy has been unable to overcome these challenges, nor has it been willing to invest to drive future growth and value creation. In the context of greater caution around our consumer exposure, we decided to move on to better opportunities.”

An artisan working away in their studio creating a unique item for the marketplace.

Etsy, Inc. (NASDAQ:ETSY) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 47 hedge fund portfolios held Etsy, Inc. (NASDAQ:ETSY) at the end of the first quarter, which was 58 in the previous quarter. While we acknowledge the potential of Etsy, Inc. (NASDAQ:ETSY) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Etsy, Inc. (NASDAQ:ETSY) and shared the list of best high short interest stocks to buy. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.

Disclosure: None. This article is originally published at Insider Monkey.