In a testament of just how influential Google Inc (NASDAQ:GOOGL) is as marshal to both the world’s internet traffic and the fates of other businesses that rely on where people’s eyeballs are directed in cyberspace, Etsy Inc (NASDAQ:ETSY) has soared by over 40% at one point today on the mere mention of its name in Google’s second quarter results, before the gains made by the online marketplace firm were pared to about 20% above yesterday’s closing price. This surely thrills investors like Chase Coleman’s Tiger Global Management, which was the first investment firm to file with the U.S. Securities and Exchange Commission on ETSY in June.
Professional investors like Chase Coleman spend considerable time and money conducting due diligence on each company they invest in, which makes them the perfect investors to emulate. However, while their returns have been strong the past two years, we also know that the returns of hedge funds on the whole have not been good for several years, underperforming the market. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of these funds performed far better than their large-cap picks, which is where most of their money is invested and why their performances as a whole have been poor. A portfolio of the 15 most popular small-cap stocks among funds outperformed the S&P 500 Total Return Index by 95 basis points per month between 1999 and 2012 in backtesting. The exceptional results of this strategy got even better in forward testing after the strategy went live at the end of August 2012. A portfolio consisting of the 15 most popular small-cap stock picks among the funds we track has returned more than 139% and beaten the market by more than 80 percentage points since then (see the details).
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In Google Inc (NASDAQ:GOOGL)’s second quarter conference call, during which it revealed that it outperformed Wall Street’s earnings expectations, Etsy Inc (NASDAQ:ETSY) was specifically named by Google Chief Business Officer Omid Kordestani as one of the developers which have seen a spike in their traffic because of Google’s indexing efforts. The internet giant is using indexing technology to give users what they are searching for even while using third-party apps. In the conference call, Kordestani said, “Developers like Etsy are already seeing a boost in traffic as a result of deep linking.” According to Google Inc (NASDAQ:GOOGL), as of the end of the second quarter, it had 50 billion links inside apps indexed. Furthermore, the internet giant said that 25% of searches on Google from Android with accounts signed-in now return deep links, which means users either see content within an app right away or are linked to the Play Store to have the app installed.