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Madison Investments’ Positive Etsy Inc. (ETSY) Outlook

Jose Karlo Mari Tottoc
·4 min read

Madison Investments, an independent employee-owned investment firm, published its third-quarter Madison Small Cap Fund letter – a copy of which can be downloaded here. A positive return of 6.97% was recorded by the fund for the 3rd Quarter of 2020, ahead of its Russell 2000 benchmark that returned 4.93%. You can view the fund’s top 10 holdings to have a peek at their top bets for 2021.

In their Q3 2020 investor Letter, Madison Investments emphasized that they were able to gain a 300% on Etsy Inc. (NASDAQ: ETSY), an e-commerce website that promotes vintage items and handmade crafts. As of writing, Etsy had a total Gross Merchandise Sales (GMS) of $3.93 billion on their platform that is composed of 60 million on sale items, 39.4 million buyers and around 2.1 million seller globally.

Here is what they have to say about Etsy in their Investor Letter:

"Over the past quarter we sold our position in marketplace company Etsy Inc. (ETSY). Readers of our letter may remember our discussion of ETSY from last year’s third quarter letter as a new position. ETSY was one of our most successful investments in recent memory, returning over 300% in less than one year. This is a salient example of a company whose fundamentals and asset price are benefitting from the unusual nature of the current recession that we have already discussed.

Etsy’s business model is rather simple. A scaled, global two-sided marketplace bringing together millions of buyers and sellers. Their platforms brings together a unique and fragmented base of artisans, artists, and unique item sellers (two million active sellers) with over 60 million of buyers (40 million active) in search of items that cannot be found in larger format retailers or online e-commerce platforms. This is a classic network effect business model where, as the marketplace grows, the economic moats widen. As the lockdown forced many of the artisans to rely more heavily on ETSY to drive their sales, consumers, with nowhere else to shop, went online to ETSY to shop for everything from handcrafted masks to unique home decorations and furniture. When we first bought the stock, the platform was approaching $5 billion of annual GMS (Gross Merchandise Sold). By the end of this year the consensus estimate is that they’ll reach $8.5 billion."

Best Things to Sell on Etsy to Make Money in 2018
Best Things to Sell on Etsy to Make Money in 2018

Evan Lorne/Shutterstock.com

Last December 2020, we published an article telling that Etsy Inc (NASDAQ:ETSY) was in 51 hedge funds’ portfolio, making that its all time high. Etsy proved its worth by giving massive returns like the gains it gave to Madison Investments.

As of September 2020, Jim Simons' Renaissance Technologies had a 3.7 million share position in ETSY that amounted to $449 million. This made Renaissance Technologies as the top hedge fund that holds most of of the Etsy's stake, followed by Two Sigma Advisors with $270,992,000 worth of Etsy shares, and HMI Capital with $165,625,000. However, our calculations showed that Etsy Inc. (NASDAQ: ETSY) isn’t ranked among the 30 most popular stocks among hedge funds.

With a total hedge fund holdings value of $1.89 billion, Etsy Inc. is also a part of the top 10 in our '15 Best E-Commerce to Buy Now' article where we talked about the 15 most valuable e-commerce stocks that are present in most hedge funds' portfolios.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of the dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website:

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

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