Is ETH A Good Investment Right Now?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Ethan Allen Interiors Inc. (NYSE:ETH) based on that data.

Is ETH a good stock to buy now? The smart money was betting on the stock. The number of bullish hedge fund bets rose by 2 in recent months. Ethan Allen Interiors Inc. (NYSE:ETH) was in 15 hedge funds’ portfolios at the end of September. The all time high for this statistic is 17. Our calculations also showed that ETH isn’t 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). There were 13 hedge funds in our database with ETH positions at the end of the second quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are dozens of formulas market participants have at their disposal to size up stocks. A pair of the most under-the-radar formulas are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outperform the broader indices by a very impressive margin (see the details here).

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet 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 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 let’s analyze the fresh hedge fund action surrounding Ethan Allen Interiors Inc. (NYSE:ETH).

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

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ETH over the last 21 quarters. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

The largest stake in Ethan Allen Interiors Inc. (NYSE:ETH) was held by Royce & Associates, which reported holding $9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $7.3 million position. Other investors bullish on the company included Millennium Management, Arrowstreet Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to Ethan Allen Interiors Inc. (NYSE:ETH), around 0.14% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.1 percent of its 13F equity portfolio to ETH.

Now, some big names were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, established the biggest position in Ethan Allen Interiors Inc. (NYSE:ETH). Citadel Investment Group had $3.9 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $0.7 million position during the quarter. The only other fund with a brand new ETH position is Minhua Zhang’s Weld Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Ethan Allen Interiors Inc. (NYSE:ETH). These stocks are Central Puerto S.A. (NYSE:CEPU), Triumph Group Inc (NYSE:TGI), Kandi Technolgies Group Inc. (NASDAQ:KNDI), VSE Corporation (NASDAQ:VSEC), Pandion Therapeutics Inc. (NASDAQ:PAND), Urstadt Biddle Properties Inc. (NYSE:UBP), and Viemed Healthcare, Inc. (NASDAQ:VMD). This group of stocks’ market values are similar to ETH’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CEPU 2 4910 -2
TGI 13 43185 -1
KNDI 1 310 -1
VSEC 3 2324 1
PAND 14 68560 14
UBP 3 700 2
VMD 14 22879 8
Average 7.1 20410 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.1 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $40 million in ETH’s case. Pandion Therapeutics Inc. (NASDAQ:PAND) is the most popular stock in this table. On the other hand Kandi Technolgies Group Inc. (NASDAQ:KNDI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Ethan Allen Interiors Inc. (NYSE:ETH) is more popular among hedge funds. Our overall hedge fund sentiment score for ETH is 83.5. 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 returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on ETH as the stock returned 39.2% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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