Hedge Funds Are Buying Mattress Firm Holding Corp (MFRM)

In the eyes of many market players, hedge funds are viewed as bloated, old financial tools of a forgotten age. Although there are over 8,000 hedge funds trading in present day, Insider Monkey looks at the crème de la crème of this club, about 525 funds. It is widely held that this group controls most of the smart money’s total capital, and by tracking their highest performing investments, we’ve revealed a number of investment strategies that have historically beaten Mr. Market. 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 topped the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Just as crucial, optimistic insider trading activity is a second way to analyze the financial markets. Obviously, there are plenty of incentives for a corporate insider to cut shares of his or her company, but just one, very obvious reason why they would behave bullishly. Various academic studies have demonstrated the valuable potential of this method if shareholders know where to look (learn more here).

Mattress Firm Holding Corp

Now that that’s out of the way, we’re going to analyze the newest info surrounding Mattress Firm Holding Corp (NASDAQ:MFRM).

What have hedge funds been doing with Mattress Firm Holding Corp (NASDAQ:MFRM)?

In preparation for the third quarter, a total of 8 of the hedge funds we track were long in this stock, a change of 14% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes considerably.

According to our 13F database, Pennant Capital Management, managed by Alan Fournier, holds the biggest position in Mattress Firm Holding Corp (NASDAQ:MFRM). Pennant Capital Management has a $77.9 million position in the stock, comprising 1.4% of its 13F portfolio. Coming in second is Bronson Point Partners, managed by Larry Foley and Paul Farrell, which held a $4 million position; 0.4% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish include Donald Chiboucis’s Columbus Circle Investors, D. E. Shaw’s D E Shaw and Matthew Hulsizer’s PEAK6 Capital Management.

Consequently, certain money managers have jumped into Mattress Firm Holding Corp (NASDAQ:MFRM) headfirst. Pennant Capital Management, managed by Alan Fournier, established the most outsized position in Mattress Firm Holding Corp (NASDAQ:MFRM). Pennant Capital Management had 77.9 million invested in the company at the end of the quarter. Larry Foley and Paul Farrell’s Bronson Point Partners also initiated a $4 million position during the quarter. The other funds with new positions in the stock are Donald Chiboucis’s Columbus Circle Investors, D. E. Shaw’s D E Shaw, and Matthew Hulsizer’s PEAK6 Capital Management.

What do corporate executives and insiders think about Mattress Firm Holding Corp (NASDAQ:MFRM)?

Legal insider trading, particularly when it’s bullish, is particularly usable when the company in question has experienced transactions within the past 180 days. Over the latest six-month time frame, Mattress Firm Holding Corp (NASDAQ:MFRM) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll go over the relationship between both of these indicators in other stocks similar to Mattress Firm Holding Corp (NASDAQ:MFRM). 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 Select Comfort Corp. (NASDAQ:SCSS). All of these stocks are in the home furnishings & fixtures industry and their market caps resemble MFRM’s market cap.