Was The Smart Money Right About Tempur Sealy International Inc. (TPX)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on Tempur Sealy International Inc. (NYSE:TPX).

Tempur Sealy International Inc. (NYSE:TPX) investors should be aware of a decrease in hedge fund interest recently. Tempur Sealy International Inc. (NYSE:TPX) was in 43 hedge funds’ portfolios at the end of December. The all time high for this statistic is 46. Our calculations also showed that TPX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Gabriel Plotkin Melvin Capital Management

Gabriel Plotkin of Melvin Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a peek at the key hedge fund action surrounding Tempur Sealy International Inc. (NYSE:TPX).

Do Hedge Funds Think TPX Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 42 hedge funds with a bullish position in TPX a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, H Partners Management, managed by Rehan Jaffer, holds the largest position in Tempur Sealy International Inc. (NYSE:TPX). H Partners Management has a $318.6 million position in the stock, comprising 38.7% of its 13F portfolio. On H Partners Management’s heels is Route One Investment Company, led by William Duhamel, holding a $185.8 million position; the fund has 5.2% of its 13F portfolio invested in the stock. Other peers that hold long positions consist of Ricky Sandler’s Eminence Capital, Gabriel Plotkin’s Melvin Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. 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 38.74% of its 13F portfolio. Route One Investment Company is also relatively very bullish on the stock, earmarking 5.23 percent of its 13F equity portfolio to TPX.

Judging by the fact that Tempur Sealy International Inc. (NYSE:TPX) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds who sold off their entire stakes in the fourth quarter. Interestingly, Gregg Moskowitz’s Interval Partners cut the biggest investment of all the hedgies monitored by Insider Monkey, totaling close to $12.4 million in stock. Brian Scudieri’s fund, Kehrs Ridge Capital, also said goodbye to its stock, about $11.6 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds in the fourth quarter.

Let’s go over hedge fund activity in other stocks similar to Tempur Sealy International Inc. (NYSE:TPX). We will take a look at Virgin Galactic Holdings, Inc. (NYSE:SPCE), Gildan Activewear Inc (NYSE:GIL), MultiPlan Corporation (NYSE:MPLN), Huntsman Corporation (NYSE:HUN), Wyndham Hotels & Resorts, Inc. (NYSE:WH), Science Applications International Corp (NYSE:SAIC), and Schrodinger, Inc. (NASDAQ:SDGR). This group of stocks’ market valuations resemble TPX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SPCE 23 114596 -1
GIL 17 625623 -1
MPLN 25 477152 -8
HUN 29 512556 5
WH 26 666874 -7
SAIC 28 293156 7
SDGR 24 949690 0
Average 24.6 519950 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.6 hedge funds with bullish positions and the average amount invested in these stocks was $520 million. That figure was $1264 million in TPX’s case. Huntsman Corporation (NYSE:HUN) is the most popular stock in this table. On the other hand Gildan Activewear Inc (NYSE:GIL) is the least popular one with only 17 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 80. 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 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks returned 13.6% in 2021 through April 30th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on TPX as the stock returned 41.6% since the end of December (through 4/30) 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.