Were Hedge Funds Right About Piling Into Etsy Inc (ETSY)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Etsy Inc (NASDAQ:ETSY) based on those filings.

Etsy Inc (NASDAQ:ETSY) shareholders have witnessed an increase in support from the world’s most elite money managers of late. Etsy Inc (NASDAQ:ETSY) was in 56 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 51. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ETSY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

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David Siegel of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s check out the recent hedge fund action regarding Etsy Inc (NASDAQ:ETSY).

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

At fourth quarter’s end, a total of 56 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 46 hedge funds with a bullish position in ETSY a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Etsy Inc (NASDAQ:ETSY) was held by Renaissance Technologies, which reported holding $681.4 million worth of stock at the end of December. It was followed by Two Sigma Advisors with a $272.6 million position. Other investors bullish on the company included Goodnow Investment Group, HMI Capital, and Light Street Capital. In terms of the portfolio weights assigned to each position Goodnow Investment Group allocated the biggest weight to Etsy Inc (NASDAQ:ETSY), around 16.27% of its 13F portfolio. Emerson Point Capital is also relatively very bullish on the stock, dishing out 5.7 percent of its 13F equity portfolio to ETSY.

As one would reasonably expect, key money managers have been driving this bullishness. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, initiated the most outsized position in Etsy Inc (NASDAQ:ETSY). LMR Partners had $22.3 million invested in the company at the end of the quarter. Steve Zheng’s Deepcurrents Investment Group also made a $12 million investment in the stock during the quarter. The other funds with brand new ETSY positions are Phill Gross and Robert Atchinson’s Adage Capital Management, Kamyar Khajavi’s MIK Capital, and Eduardo Costa’s Calixto Global Investors.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Etsy Inc (NASDAQ:ETSY) but similarly valued. These stocks are AvalonBay Communities Inc (NYSE:AVB), China Telecom Corporation Limited (NYSE:CHA), Enphase Energy Inc (NASDAQ:ENPH), Equity Residential (NYSE:EQR), Arista Networks Inc (NYSE:ANET), Nokia Corporation (NYSE:NOK), and W.W. Grainger, Inc. (NYSE:GWW). This group of stocks’ market values are closest to ETSY’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVB 32 864498 3
CHA 5 19901 2
ENPH 48 988127 6
EQR 28 557427 1
ANET 35 396873 8
NOK 19 186378 -2
GWW 30 507444 2
Average 28.1 502950 2.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $503 million. That figure was $1963 million in ETSY’s case. Enphase Energy Inc (NASDAQ:ENPH) is the most popular stock in this table. On the other hand China Telecom Corporation Limited (NYSE:CHA) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Etsy Inc (NASDAQ:ETSY) is more popular among hedge funds. Our overall hedge fund sentiment score for ETSY is 90. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Unfortunately ETSY wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ETSY were disappointed as the stock returned 11.7% since the end of the fourth quarter (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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