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Why Greenhaven Road, a Top Performing Hedge Fund in Q3, Likes Etsy Inc (ETSY)

Greenhaven Road isn’t a very well known fund, but it is one of the top performers of 2017 and for Q3. In terms of its performance, Greenhaven Road’s gross returns for Q3 clocked in at 12%, and the fund’s year-to-date net of fees return rose to 38%. Given the fund’s admirable performance, let’s take a look at one of its top five positions, Etsy Inc (NASDAQ:ETSY).

While one may wonder if e-commerce companies can stand on their own two feet when Amazon.com, Inc. (NASDAQ:AMZN) continues to grow and dominate, Etsy Inc (NASDAQ:ETSY)’s performance has been rather solid. For the year Etsy’s year to date return has clocked in at 41%, well above the S&P’s performance. In terms of its most recent quarter, Etsy has also done well, reporting EPS of $0.10 on revenue of $101.69 million for the second quarter, beating the Street by $0.12 per share and $0.55 million, respectively. In addition to the solid financial performance, Etsy CEO promised to double down on the company’s core Etsy.com market and also take initiatives to have a positive impact on GMS.

Evan Lorne/Shutterstock.com

Evan Lorne/Shutterstock.com

As for what Greenhaven Road has to say about Etsy Inc (NASDAQ:ETSY), the fund believes it is ‘one of the healthiest companies’ that replaced its CFO and CEO and that has laid off a big chunk (20%) of its labor force. While Etsy has been in turmoil, Greenhaven Road notes Etsy is ‘still guiding to revenue growth of 18-20% this year, and showed growth in the number of both sellers and buyers on the platform’. There has also been some insider buying as the fund notes Etsy’s CEO purchased $1 million worth of shares in the past quarter. Although Etsy’s management’s stake in the entire company ‘is less than ideal’, the fund believes the insider purchase is ‘a step in the right direction’.

Greenhaven Road also notes that Etsy Inc (NASDAQ:ETSY)’s new management is ‘pursuing a coherent strategy of focusing on growing the core marketplace’, which if Etsy succeeds, could potentially increase EPS down the road.

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Disclosure: None