Is Select Comfort Corp. (SCSS) A Good Stock To Buy?

How do we determine whether Select Comfort Corp. (NASDAQ:SCSS) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Is Select Comfort Corp. a buy here? The best stock pickers are selling. The number of long hedge fund positions went down by 4 recently. At the end of this article we will also compare SCSS to other stocks including John Bean Technologies Corporation (NYSE:JBT), Innospec Inc. (NASDAQ:IOSP), and Omnicell, Inc. (NASDAQ:OMCL) to get a better sense of its popularity.

If you’d ask most shareholders, hedge funds are assumed to be underperforming, old financial vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, Our experts look at the aristocrats of this group, about 700 funds. These hedge fund managers have their hands on the lion’s share of the hedge fund industry’s total capital, and by paying attention to their inimitable equity investments, Insider Monkey has determined many investment strategies that have historically outstripped the market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, we’re going to analyze the fresh action surrounding Select Comfort Corp. (NASDAQ:SCSS).

What does the smart money think about Select Comfort Corp. (NASDAQ:SCSS)?

At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the second quarter. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Birch Run Capital, managed by Daniel Beltzman and Gergory Smith, holds the most valuable position in Select Comfort Corp. (NASDAQ:SCSS). Birch Run Capital has a $26.1 million position in the stock, comprising 7.1% of its 13F portfolio. The second largest stake is held by Blue Clay Capital, managed by Adam Wright and Gary Kohler, which holds a $18.8 million position; the fund has 15% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish consist of Israel Englander’s Millennium Management, Jim Simons’ Renaissance Technologies and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Because Select Comfort Corp. (NASDAQ:SCSS) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedgies that elected to cut their positions entirely in the third quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, worth an estimated $24.6 million in stock, and Lee Munder’s Lee Munder Capital Group was right behind this move, as the fund cut about $10.9 million worth of shares. These moves are interesting, as aggregate hedge fund interest fell by 4 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Select Comfort Corp. (NASDAQ:SCSS). We will take a look at John Bean Technologies Corporation (NYSE:JBT), Innospec Inc. (NASDAQ:IOSP), Omnicell, Inc. (NASDAQ:OMCL), and The Navigators Group, Inc (NASDAQ:NAVG). This group of stocks’ market caps are closest to SCSS’s market cap.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $101 million, compared to $139 million in SCSS’s case. John Bean Technologies Corporation (NYSE:JBT) is the most popular stock in this table with a total of 19 long positions, while The Navigators Group, Inc (NASDAQ:NAVG) is the least popular one. Compared to these stocks Select Comfort Corp. (NASDAQ:SCSS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.