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This Metric Says You Are Smart to Sell Select Comfort Corp. (SCSS)

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What should a Select Comfort Corp. (NASDAQ:SCSS) investor do?

At the moment, there are plenty of gauges market participants can use to analyze publicly traded companies. A pair of the most innovative are hedge fund and insider trading activity. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the top investment managers can beat their index-focused peers by a healthy amount (see just how much).

Select Comfort Corp. (NASDAQ:SCSS)

Equally as crucial, bullish insider trading activity is a second way to analyze the financial markets. Just as you’d expect, there are many reasons for an insider to get rid of shares of his or her company, but just one, very clear reason why they would buy. Several empirical studies have demonstrated the market-beating potential of this strategy if you know what to do (learn more here).

Keeping this in mind, let’s examine the newest info surrounding Select Comfort Corp. (NASDAQ:SCSS).

Hedge fund activity in Select Comfort Corp. (NASDAQ:SCSS)

Heading into Q3, a total of 14 of the hedge funds we track held long positions in this stock, a change of -22% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes substantially.

Out of the hedge funds we follow, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in Select Comfort Corp. (NASDAQ:SCSS). Adage Capital Management has a $56.5 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Sheffield Asset Management, managed by Craig C. Albert, which held a $19.5 million position; the fund has 4.1% of its 13F portfolio invested in the stock. Other peers with similar optimism include David Keidan’s Buckingham Capital Management, John Murphy’s Alydar Capital and Mark Broach’s Manatuck Hill Partners.

Because Select Comfort Corp. (NASDAQ:SCSS) has witnessed declining interest from the entirety of the hedge funds we track, we can see that there was a specific group of hedgies that elected to cut their full holdings at the end of the second quarter. It’s worth mentioning that Jim Simons’s Renaissance Technologies said goodbye to the largest investment of the “upper crust” of funds we key on, worth close to $7.9 million in stock, and Sanford J. Colen of Apex Capital was right behind this move, as the fund sold off about $7.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds at the end of the second quarter.

How have insiders been trading Select Comfort Corp. (NASDAQ:SCSS)?

Insider buying made by high-level executives is best served when the primary stock in question has experienced transactions within the past six months. Over the last six-month time frame, Select Comfort Corp. (NASDAQ:SCSS) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also examine the relationship between both of these indicators in other stocks similar to Select Comfort Corp. (NASDAQ:SCSS). These stocks are Tempur-Pedic International Inc. (NYSE:TPX), American Woodmark Corporation (NASDAQ:AMWD), Ethan Allen Interiors Inc. (NYSE:ETH), La-Z-Boy Incorporated (NYSE:LZB), and Mattress Firm Holding Corp (NASDAQ:MFRM). This group of stocks are in the home furnishings & fixtures industry and their market caps are closest to SCSS’s market cap.

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