How do we determine whether Ethan Allen Interiors Inc. (NYSE:ETH) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Ethan Allen Interiors Inc. (NYSE:ETH) the right pick for your portfolio? Money managers are selling. The number of bullish hedge fund positions went down by 2 recently. Our calculations also showed that ETH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Harding of Winton Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a glance at the key hedge fund action regarding Ethan Allen Interiors Inc. (NYSE:ETH).
What does smart money think about Ethan Allen Interiors Inc. (NYSE:ETH)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in ETH a year ago. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies has the most valuable position in Ethan Allen Interiors Inc. (NYSE:ETH), worth close to $18.3 million, accounting for less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $14.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions encompass Chuck Royce’s Royce & Associates, Ken Griffin’s Citadel Investment Group and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Ethan Allen Interiors Inc. (NYSE:ETH), around 0.12% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to ETH.
Seeing as Ethan Allen Interiors Inc. (NYSE:ETH) has faced bearish sentiment from the smart money, it’s safe to say that there is a sect of money managers that decided to sell off their full holdings by the end of the third quarter. Interestingly, Lee Ainslie’s Maverick Capital sold off the biggest position of the 750 funds monitored by Insider Monkey, totaling an estimated $4.5 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $4.5 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Ethan Allen Interiors Inc. (NYSE:ETH). These stocks are Changyou.Com Ltd (NASDAQ:CYOU), Gores Metropoulos, Inc. (NASDAQ:GMHI), Blue Bird Corporation (NASDAQ:BLBD), and Sunlands Technology Group (NYSE:STG). This group of stocks’ market values are closest to ETH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CYOU | 13 | 38009 | 4 |
| GMHI | 19 | 163294 | -1 |
| BLBD | 7 | 57343 | 2 |
| STG | 1 | 885 | 0 |
| Average | 10 | 64883 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $63 million in ETH’s case. Gores Metropoulos, Inc. (NASDAQ:GMHI) is the most popular stock in this table. On the other hand Sunlands Technology Group (NYSE:STG) is the least popular one with only 1 bullish hedge fund positions. Ethan Allen Interiors Inc. (NYSE:ETH) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ETH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ETH were disappointed as the stock returned -5.3% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
