Hedge Funds Are Dumping Mattress Firm Holding Corp (MFRM)

Mattress Firm Holding Corp (NASDAQ:MFRM) was in 8 hedge funds’ portfolio at the end of the fourth quarter of 2012. MFRM shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. There were 10 hedge funds in our database with MFRM holdings at the end of the previous quarter.

According to most traders, hedge funds are assumed to be underperforming, outdated financial vehicles of years past. While there are over 8000 funds with their doors open at the moment, we hone in on the moguls of this group, close to 450 funds. Most estimates calculate that this group has its hands on the lion’s share of all hedge funds’ total asset base, and by monitoring their highest performing investments, we have unsheathed a number of investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 24 percentage points in 7 months (see the details here).

Just as important, positive insider trading activity is a second way to break down the marketplace. As the old adage goes: there are a number of motivations for an executive to sell shares of his or her company, but just one, very obvious reason why they would behave bullishly. Plenty of empirical studies have demonstrated the valuable potential of this tactic if “monkeys” know what to do (learn more here).

Keeping this in mind, it’s important to take a gander at the recent action regarding Mattress Firm Holding Corp (NASDAQ:MFRM).

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

In preparation for this year, a total of 8 of the hedge funds we track were bullish in this stock, a change of -20% from the previous quarter. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly.

When looking at the hedgies we track, Alan Fournier’s Pennant Capital Management had the largest position in Mattress Firm Holding Corp (NASDAQ:MFRM), worth close to $50 million, comprising 1% of its total 13F portfolio. The second largest stake is held by SAC Subsidiary of CR Intrinsic Investors, with a $11.2 million position; 0.5% of its 13F portfolio is allocated to the company. Some other hedgies with similar optimism include John Murphy’s Alydar Capital, Mark Kingdon’s Kingdon Capital and Ken Griffin’s Citadel Investment Group.

Seeing as Mattress Firm Holding Corp (NASDAQ:MFRM) has experienced falling interest from the smart money, logic holds that there were a few fund managers that decided to sell off their full holdings at the end of the year. Interestingly, Mark Broach’s Manatuck Hill Partners dumped the biggest stake of the 450+ funds we key on, comprising about $10.8 million in stock., and Donald Chiboucis of Columbus Circle Investors was right behind this move, as the fund cut about $1.4 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds at the end of the year.

What do corporate executives and insiders think about Mattress Firm Holding Corp (NASDAQ:MFRM)?

Bullish insider trading is particularly usable when the primary stock in question has experienced transactions within the past six months. Over the last half-year time period, Mattress Firm Holding Corp (NASDAQ:MFRM) has experienced zero unique insiders purchasing, and 8 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Mattress Firm Holding Corp (NASDAQ:MFRM). These stocks are Tempur-Pedic International Inc. (NYSE:TPX), American Woodmark Corporation (NASDAQ:AMWD), Ethan Allen Interiors Inc. (NYSE:ETH), La-Z-Boy Incorporated (NYSE:LZB), and Select Comfort Corp. (NASDAQ:SCSS). This group of stocks belong to the home furnishings & fixtures industry and their market caps are closest to MFRM’s market cap.

With the returns demonstrated by Insider Monkey’s time-tested strategies, retail investors must always keep an eye on hedge fund and insider trading sentiment, and Mattress Firm Holding Corp (NASDAQ:MFRM) is no exception.

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