Hedge Funds Are Betting On Mattress Firm Holding Corp (MFRM)

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Is Mattress Firm Holding Corp (NASDAQ:MFRM) the right investment to pursue these days? The best stock pickers are turning bullish. The number of bullish hedge fund bets increased by 3 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Joy Global Inc. (NYSE:JOY), Loral Space & Communications Ltd. (NASDAQ:LORL), and Abercrombie & Fitch Co. (NYSE:ANF) to gather more data points.

At the moment there are plenty of methods market participants can use to appraise publicly traded companies. A duo of the most useful methods are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the best investment managers can outpace the S&P 500 by a significant margin (see the details here).

Keeping this in mind, we’re going to take a peek at the new action encompassing Mattress Firm Holding Corp (NASDAQ:MFRM).

Hedge fund activity in Mattress Firm Holding Corp (NASDAQ:MFRM)

Heading into Q4, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 30% from the second quarter. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alan Fournier’s Pennant Capital Management has the biggest position in Mattress Firm Holding Corp (NASDAQ:MFRM), worth close to $114.3 million, amounting to 2.4% of its total 13F portfolio. On Pennant Capital Management’s heels is Sharlyn C. Heslam’s Stockbridge Partners, with a $107.7 million position; 6.1% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish include David S. Winter and David J. Millstone’s 40 North Management, Ken Griffin’s Citadel Investment Group and James A. Noonan’s Pivot Point Capital.

As one would reasonably expect, key hedge funds have been driving this bullishness. Pivot Point Capital created the most outsized position in Mattress Firm Holding Corp (NASDAQ:MFRM). Pivot Point Capital had $11.7 million invested in the company at the end of the quarter. David Keidan’s Buckingham Capital Management also initiated a $9.7 million position during the quarter. The following funds were also among the new MFRM investors: D. E. Shaw’s D E Shaw, Benjamin A. Smith’s Laurion Capital Management, and Jacob Gottlieb’s Visium Asset Management.

Let’s go over hedge fund activity in other stocks similar to Mattress Firm Holding Corp (NASDAQ:MFRM). We will take a look at Joy Global Inc. (NYSE:JOY), Loral Space & Communications Ltd. (NASDAQ:LORL), Abercrombie & Fitch Co. (NYSE:ANF), and Tetra Tech, Inc. (NASDAQ:TTEK). All of these stocks’ market caps resemble MFRM’s market cap.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $343 million, close to the $368 million in MFRM’s case. Joy Global Inc. (NYSE:JOY) is the most popular stock in this table, while Tetra Tech, Inc. (NASDAQ:TTEK) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Mattress Firm Holding Corp (NASDAQ:MFRM) is even less popular than TTEK. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.