The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Ethan Allen Interiors Inc. (NYSE:ETH) from the perspective of those elite funds.
Is Ethan Allen Interiors Inc. (NYSE:ETH) the right investment to pursue these days? Prominent investors are getting more optimistic. The number of long hedge fund positions improved by 4 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Radware Ltd. (NASDAQ:RDWR), Inteliquent (NASDAQ:IQNT), and MaxLinear, Inc. (NYSE:MXL) to gather more data points.
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Keeping this in mind, let’s go over the new action regarding Ethan Allen Interiors Inc. (NYSE:ETH).
What does the smart money think about Ethan Allen Interiors Inc. (NYSE:ETH)?
Heading into Q4, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 31% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the largest position in Ethan Allen Interiors Inc. (NYSE:ETH). Royce & Associates has a $76.2 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by Sandell Asset Management, led by Tom Sandell, holding a $36.2 million position; 5.6% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism consist of Crispin Odey’s Odey Asset Management Group, Lee Munder’s Lee Munder Capital Group and Mario Gabelli’s GAMCO Investors.
As aggregate interest increased, key money managers have been driving this bullishness. Whitebox Advisors, managed by Andy Redleaf, assembled the most outsized position in Ethan Allen Interiors Inc. (NYSE:ETH). Whitebox Advisors had $5 million invested in the company at the end of the quarter. Paul Hondros’ AlphaOne Capital Partners also initiated a $3.3 million position during the quarter. The other funds with new positions in the stock are Ken Fisher’s Fisher Asset Management, Joel Greenblatt’s Gotham Asset Management, and Chao Ku’s Nine Chapters Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Ethan Allen Interiors Inc. (NYSE:ETH) but similarly valued. We will take a look at Radware Ltd. (NASDAQ:RDWR), Inteliquent (NASDAQ:IQNT), MaxLinear, Inc. (NYSE:MXL), and Quotient Technology Inc (NYSE:COUP). This group of stocks’ market values resemble ETH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RDWR | 21 | 159645 | -1 |
| IQNT | 17 | 65612 | 3 |
| MXL | 24 | 177198 | 1 |
| COUP | 7 | 32237 | -4 |
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $183 million in ETH’s case. MaxLinear, Inc. (NYSE:MXL) is the most popular stock in this table. On the other hand Quotient Technology Inc (NYSE:COUP) is the least popular one with only 7 bullish hedge fund positions. Ethan Allen Interiors Inc. (NYSE:ETH) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MXL might be a better candidate to consider a long position.
