In this article we will check out the progression of hedge fund sentiment towards Tempur Sealy International Inc. (NYSE:TPX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Tempur Sealy International Inc. (NYSE:TPX) a healthy stock for your portfolio? Prominent investors are turning less bullish. The number of bullish hedge fund bets shrunk by 4 recently. Our calculations also showed that TPX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
If you'd ask most investors, hedge funds are viewed as unimportant, old investment tools of years past. While there are greater than 8000 funds in operation at present, Our experts choose to focus on the elite of this group, about 850 funds. These investment experts oversee the lion's share of the hedge fund industry's total capital, and by watching their matchless picks, Insider Monkey has revealed numerous investment strategies that have historically beaten Mr. Market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_364882" align="aligncenter" width="397"] Mark Kingdon of Kingdon Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a gander at the fresh hedge fund action regarding Tempur Sealy International Inc. (NYSE:TPX).
How are hedge funds trading Tempur Sealy International Inc. (NYSE:TPX)?
At the end of the first quarter, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TPX over the last 18 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in Tempur Sealy International Inc. (NYSE:TPX) was held by H Partners Management, which reported holding $161.7 million worth of stock at the end of September. It was followed by Route One Investment Company with a $63.9 million position. Other investors bullish on the company included Eminence Capital, Interval Partners, and Scopus Asset Management. In terms of the portfolio weights assigned to each position H Partners Management allocated the biggest weight to Tempur Sealy International Inc. (NYSE:TPX), around 62.31% of its 13F portfolio. Lyon Street Capital is also relatively very bullish on the stock, designating 2.78 percent of its 13F equity portfolio to TPX.
Because Tempur Sealy International Inc. (NYSE:TPX) has faced declining sentiment from hedge fund managers, we can see that there were a few hedgies who sold off their entire stakes in the third quarter. It's worth mentioning that Dmitry Balyasny's Balyasny Asset Management dumped the biggest position of all the hedgies followed by Insider Monkey, comprising close to $32.2 million in stock, and David Einhorn's Greenlight Capital was right behind this move, as the fund dumped about $23.3 million worth. These transactions are interesting, as total hedge fund interest fell by 4 funds in the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Tempur Sealy International Inc. (NYSE:TPX) but similarly valued. These stocks are J&J Snack Foods Corp. (NASDAQ:JJSF), Valmont Industries, Inc. (NYSE:VMI), Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), and Kohl's Corporation (NYSE:KSS). This group of stocks' market valuations resemble TPX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JJSF,17,83077,4 VMI,24,218687,0 DCPH,28,603787,0 KSS,26,145325,-2 Average,23.75,262719,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $263 million. That figure was $502 million in TPX's case. Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) is the most popular stock in this table. On the other hand J&J Snack Foods Corp. (NASDAQ:JJSF) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Tempur Sealy International Inc. (NYSE:TPX) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on TPX as the stock returned 49.2% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.