Etsy Inc (ETSY) Fell Out Of Favor With Hedge Funds

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Etsy Inc (NASDAQ:ETSY).

Etsy Inc (NASDAQ:ETSY) investors should be aware of a decrease in enthusiasm from smart money recently. Etsy Inc (NASDAQ:ETSY) was in 47 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 56. Our calculations also showed that ETSY isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Cathie Wood of ARK Investment Management

At Insider Monkey, we scour multiple sources to uncover 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 EV 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 we’re going to go over the latest hedge fund action encompassing Etsy Inc (NASDAQ:ETSY).

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

At the end of the second quarter, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. On the other hand, there were a total of 43 hedge funds with a bullish position in ETSY a year ago. So, let’s review 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 $362.9 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $283.1 million position. Other investors bullish on the company included Two Sigma Advisors, Goodnow Investment Group, and Marshall Wace LLP. In terms of the portfolio weights assigned to each position Goodnow Investment Group allocated the biggest weight to Etsy Inc (NASDAQ:ETSY), around 13.27% of its 13F portfolio. Half Sky Capital is also relatively very bullish on the stock, dishing out 12.82 percent of its 13F equity portfolio to ETSY.

Due to the fact that Etsy Inc (NASDAQ:ETSY) has experienced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few funds that decided to sell off their positions entirely in the second quarter. Intriguingly, Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management dumped the biggest position of all the hedgies followed by Insider Monkey, worth an estimated $108.9 million in stock. Steve Zheng’s fund, Deepcurrents Investment Group, also dropped its stock, about $11.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 6 funds in the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Etsy Inc (NASDAQ:ETSY) but similarly valued. We will take a look at Generac Holdings Inc. (NYSE:GNRC), Slack Technologies Inc (NYSE:WORK), Hormel Foods Corporation (NYSE:HRL), Weyerhaeuser Co. (NYSE:WY), Kansas City Southern (NYSE:KSU), Teladoc Health, Inc (NYSE:TDOC), and Verisign, Inc. (NASDAQ:VRSN). All of these stocks’ market caps are closest to ETSY’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.9 hedge funds with bullish positions and the average amount invested in these stocks was $2875 million. That figure was $1732 million in ETSY’s case. Slack Technologies Inc (NYSE:WORK) is the most popular stock in this table. On the other hand Hormel Foods Corporation (NYSE:HRL) is the least popular one with only 24 bullish hedge fund positions. Etsy Inc (NASDAQ:ETSY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ETSY is 55.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.9% in 2021 through October 1st and beat the market again by 5.6 percentage points. Unfortunately ETSY wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ETSY were disappointed as the stock returned -0.7% since the end of June (through 10/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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