The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Tempur Sealy International Inc. (NYSE:TPX) and determine whether the smart money was really smart about this stock.
Is Tempur Sealy International Inc. (NYSE:TPX) undervalued? Hedge funds were taking an optimistic view. The number of bullish hedge fund positions rose by 8 recently. Tempur Sealy International Inc. (NYSE:TPX) was in 46 hedge funds’ portfolios at the end of June. The all time high for this statistics is 42. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TPX isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind let’s go over the latest hedge fund action regarding Tempur Sealy International Inc. (NYSE:TPX).
How are hedge funds trading Tempur Sealy International Inc. (NYSE:TPX)?
At Q2’s end, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in TPX over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Tempur Sealy International Inc. (NYSE:TPX) was held by H Partners Management, which reported holding $212.3 million worth of stock at the end of September. It was followed by Route One Investment Company with a $151.2 million position. Other investors bullish on the company included Eminence Capital, Melvin Capital Management, and Citadel Investment Group. 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 47.67% of its 13F portfolio. Think Investments is also relatively very bullish on the stock, dishing out 5.26 percent of its 13F equity portfolio to TPX.
As one would reasonably expect, key money managers have been driving this bullishness. Melvin Capital Management, managed by Gabriel Plotkin, assembled the most outsized position in Tempur Sealy International Inc. (NYSE:TPX). Melvin Capital Management had $100.7 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also made a $23.8 million investment in the stock during the quarter. The other funds with brand new TPX positions are Shashin Shah’s Think Investments, Dmitry Balyasny’s Balyasny Asset Management, and Brad Stephens’s Six Columns Capital.
Let’s go over 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 Dicks Sporting Goods Inc (NYSE:DKS), Ultrapar Participacoes SA (NYSE:UGP), RLI Corp. (NYSE:RLI), Agios Pharmaceuticals Inc (NASDAQ:AGIO), Tapestry, Inc. (NYSE:TPR), Simpson Manufacturing Co, Inc. (NYSE:SSD), and Alamos Gold Inc (NYSE:AGI). All of these stocks’ market caps are closest to TPX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DKS | 40 | 493110 | 13 |
| UGP | 7 | 38733 | 2 |
| RLI | 20 | 160243 | 5 |
| AGIO | 30 | 460464 | 7 |
| TPR | 39 | 533337 | 2 |
| SSD | 21 | 200223 | -5 |
| AGI | 16 | 399028 | -3 |
| Average | 24.7 | 326448 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $326 million. That figure was $1023 million in TPX’s case. Dicks Sporting Goods Inc (NYSE:DKS) is the most popular stock in this table. On the other hand Ultrapar Participacoes SA (NYSE:UGP) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Tempur Sealy International Inc. (NYSE:TPX) is more popular among hedge funds. Our overall hedge fund sentiment score for TPX is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 33% in 2020 through the end of August but still managed to beat the market by 23.2 percentage points. Hedge funds were also right about betting on TPX as the stock returned 18.9% since the end of June 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.
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Disclosure: None. This article was originally published at Insider Monkey.
