Did Hedge Funds Get Tempur Sealy International Inc. (TPX) Right?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Tempur Sealy International Inc. (NYSE:TPX) based on that data and determine whether they were really smart about the stock.

Tempur Sealy International Inc. (NYSE:TPX) has experienced an increase in activity from the world’s largest hedge funds in recent months. Tempur Sealy International Inc. (NYSE:TPX) was in 37 hedge funds’ portfolios at the end of the third quarter of 2021. 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 Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now let’s take a glance at the latest hedge fund action surrounding Tempur Sealy International Inc. (NYSE:TPX).

Ricky Sandler of Eminence Capital

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

At the end of the third quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in TPX over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, H Partners Management was the largest shareholder of Tempur Sealy International Inc. (NYSE:TPX), with a stake worth $357.4 million reported as of the end of September. Trailing H Partners Management was Eminence Capital, which amassed a stake valued at $179.4 million. D1 Capital Partners, Abrams Capital Management, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. 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 32.39% of its 13F portfolio. Six Columns Capital is also relatively very bullish on the stock, setting aside 6.96 percent of its 13F equity portfolio to TPX.

As aggregate interest increased, key money managers have jumped into Tempur Sealy International Inc. (NYSE:TPX) headfirst. D1 Capital Partners, managed by Daniel Sundheim, assembled the largest position in Tempur Sealy International Inc. (NYSE:TPX). D1 Capital Partners had $167.1 million invested in the company at the end of the quarter. David Abrams’s Abrams Capital Management also initiated a $167.1 million position during the quarter. The other funds with brand new TPX positions are Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Matthew Hulsizer’s PEAK6 Capital Management, and Alexander Shapiro’s Anabranch 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 Concentrix Corporation (NASDAQ:CNXC), AECOM (NYSE:ACM), Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), Algonquin Power & Utilities Corp. (NYSE:AQN), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), Sunrun Inc (NASDAQ:RUN), and Ascendis Pharma A/S (NASDAQ:ASND). This group of stocks’ market valuations resemble TPX’s market valuation.

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As you can see these stocks had an average of 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $1153 million. That figure was $1299 million in TPX’s case. AECOM (NYSE:ACM) is the most popular stock in this table. On the other hand Algonquin Power & Utilities Corp. (NYSE:AQN) is the least popular one with only 15 bullish hedge fund positions. Tempur Sealy International Inc. (NYSE:TPX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TPX is 77. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, TPX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TPX were disappointed as the stock returned -14% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.