Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
Etsy Inc (NASDAQ:ETSY) shareholders have witnessed a large increase in enthusiasm from smart money lately. ETSY was in 21 hedge funds’ portfolios at the end of the third quarter of 2016. There were 16 hedge funds in our database with ETSY holdings at the end of the previous quarter. At the end of this article we will also compare Etsy to other stocks including Apollo Commercial Real Est. Finance Inc (NYSE:ARI), Cubic Corporation (NYSE:CUB), and Union First Market Bankshares Corp. (NASDAQ:UBSH) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Keeping this in mind, let’s take a glance at the recent action encompassing Etsy Inc (NASDAQ:ETSY).
Hedge fund activity in Etsy Inc (NASDAQ:ETSY)
Heading into the fourth quarter of 2016, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 31% from the second quarter of 2016. This is also the highest level of hedge fund popularity achieved by Etsy over the past 5 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Chase Coleman’s Tiger Global Management LLC has the biggest position in Etsy Inc (NASDAQ:ETSY), worth close to $147.3 million, comprising 2.1% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, led by Jim Simons, holding a $54.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish comprise D. E. Shaw’s D E Shaw, Robert Karr’s Joho Capital and John Paulson’s Paulson & Co.
As aggregate interest increased, key money managers have jumped into Etsy Inc (NASDAQ:ETSY) headfirst. Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, assembled the most valuable position in Etsy Inc (NASDAQ:ETSY). Shellback Capital had $6.2 million invested in the company at the end of the quarter. Andrew Sandler’s Sandler Capital Management also initiated a $5.9 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Peter Muller’s PDT Partners, and John Osterweis’s Osterweis Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Etsy Inc (NASDAQ:ETSY). These stocks are Apollo Commercial Real Est. Finance Inc (NYSE:ARI), Cubic Corporation (NYSE:CUB), Union First Market Bankshares Corp. (NASDAQ:UBSH), and American Woodmark Corporation (NASDAQ:AMWD). This group of stocks’ market valuations resemble ETSY’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $340 million in ETSY’s case. Cubic Corporation (NYSE:CUB) is the most popular stock in this table. On the other hand Apollo Commercial Real Est. Finance Inc (NYSE:ARI) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Etsy Inc (NASDAQ:ETSY) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.