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Sealy Corporation (NYSE:ZZ): Hedge Funds and Insiders Are Bearish, What Should You Do?

Sealy Corporation (NYSE:ZZ) was in 14 hedge funds’ portfolio at the end of December. ZZ investors should pay attention to a decrease in hedge fund interest recently. There were 17 hedge funds in our database with ZZ holdings at the end of the previous quarter.

Sealy Corporation (NYSE:ZZ)

According to most investors, hedge funds are seen as underperforming, outdated financial tools of yesteryear. While there are over 8000 funds in operation today, we at Insider Monkey look at the leaders of this group, close to 450 funds. It is widely believed that this group has its hands on the majority of the smart money’s total asset base, and by paying attention to their top investments, we have formulated a few investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Equally as integral, optimistic insider trading activity is another way to break down the marketplace. As the old adage goes: there are lots of stimuli for an upper level exec to get rid of shares of his or her company, but only one, very simple reason why they would behave bullishly. Several academic studies have demonstrated the useful potential of this strategy if investors know where to look (learn more here).

With these “truths” under our belt, we’re going to take a peek at the latest action encompassing Sealy Corporation (NYSE:ZZ).

Hedge fund activity in Sealy Corporation (NYSE:ZZ)

At year’s end, a total of 14 of the hedge funds we track were long in this stock, a change of -18% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly.

When looking at the hedgies we track, Rehan Jaffer’s H Partners Management had the most valuable position in Sealy Corporation (NYSE:ZZ), worth close to $38 million, comprising 3.5% of its total 13F portfolio. Sitting at the No. 2 spot is Hudson Bay Capital Management, managed by Sander Gerber, which held a $25 million position; 0.1% of its 13F portfolio is allocated to the company. Some other hedge funds with similar optimism include Paul Glazer’s Glazer Capital, Cliff Asness’s AQR Capital Management and Kyle Bass’s Hayman Advisors.

Due to the fact that Sealy Corporation (NYSE:ZZ) has experienced a declination in interest from the smart money, logic holds that there lies a certain “tier” of hedge funds that slashed their full holdings at the end of the year. It’s worth mentioning that Andrew Weiss’s Weiss Asset Management cut the biggest investment of the 450+ funds we track, comprising close to $2 million in stock.. Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s fund, GRT Capital Partners, also cut its stock, about $0 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 3 funds at the end of the year.

Insider trading activity in Sealy Corporation (NYSE:ZZ)

Insider trading activity, especially when it’s bullish, is most useful when the company in focus has seen transactions within the past six months. Over the latest 180-day time period, Sealy Corporation (NYSE:ZZ) has experienced zero unique insiders buying, and 1 insider sales (see the details of insider trades here).

With the returns shown by our time-tested strategies, retail investors should always monitor hedge fund and insider trading sentiment, and Sealy Corporation (NYSE:ZZ) is no exception.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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