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40 North Trims Exposure to Mattress Firm Holding, Plus Check Out Its Other Top Picks

40 North Management, the investment firm managed by David S. Winter (pictured) and David J. Millstone, recently filed its 13D with the U.S. Securities and Exchange Commission. The fund disclosed on March 24, a reduction in its exposure to Mattress Firm Holding Corp (NASDAQ:MFRM), since the fourth quarter of 2014. Following the sale of just under 186,700 shares of Common Stock, the firm owns 2.37 million shares of the company, which account for roughly 6.77% of its total shares outstanding, and are worth more than $162.5 million at today opening price of $68.53 per share. Mattress Firm Holding Corp (NASDAQ:MFRM) is a $2.36 billion market-cap specialty retailer of mattresses and related products and accessories in the United States.

David Winters

David S. Winter and David J. Millstone are the co-CEOs and co-CIOs of 40 North Management, a New York-based privately-held, diversified investment firm that invests across the public and private markets, including in real estate through Winter Properties. The fund disclosed an equity portfolio valued at some $1.87 billion as of the end of 2014, with the fund’s capital being allocated towards the healthcare (32%), finance (28%) and consumer discretionary (15%) sectors.

The latest move in Mattress Firm Holding Corp (NASDAQ:MFRM) by the fund comes amid the company reporting its financial results for the fourth quarter and fiscal year 2014, which ended February 3, 2015. Revenue leaped by 91.3% in the fourth quarter when compared to the same quarter one year prior, to $599.4 million from $313.4 million. Along with this, it reported fiscal fourth-quarter earnings of $6.6 million, or $0.19, which decreased by 23.5% when compared to the same quarter one year ago. For the year, revenue increased by 48.4% to $1.81 billion, compared to $1.22 billion in the prior year period. Also, it reported profit of $44.3 million or $1.27 per share in that time frame.

The Houston-based company showed good revenue growth that exceeded the industry average. Further, compared to its closing price of one year ago, the share price has jumped by more than 33%, exceeding the performance of the market. Moreover, the company’s gross profit margin is considered high, at around 40%.

Following the release of the retailer’s fourth quarter earnings results, shares were climbing in after-hours trading, up 7.37% to $68.75 after the closing bell on March 19.  The company’s stock is up about 18% year-to-date. On March 23, it reached the highest level in 2015 at a price of $70.42 per share, which perhaps prompted the recent sale of shares by 40 North.

Among the funds that we track, another shareholder of Mattress Firm Holding Corp (NASDAQ:MFRM) is Sharlyn C. Heslam’s Stockbridge Partners, which held some 2.13 million shares as of the end of 2014, up by 4% on the quarter. The position was valued at $123.9 million, and accounted for 6.56% of the fund’s equity portfolio.

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