Is TPX Stock A Buy or Sell?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Tempur Sealy International Inc. (NYSE:TPX).

Is TPX stock a buy or sell? Tempur Sealy International Inc. (NYSE:TPX) investors should be aware of a decrease in support from the world’s most elite money managers of late. 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. There were 46 hedge funds in our database with TPX holdings at the end of September. 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. 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).

Ricky Sandler of Eminence Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 website. With all of this in mind we’re going to analyze the fresh hedge fund action surrounding Tempur Sealy International Inc. (NYSE:TPX).

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

At Q4’s end, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TPX over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, H Partners Management held the most valuable stake in Tempur Sealy International Inc. (NYSE:TPX), which was worth $318.6 million at the end of the fourth quarter. On the second spot was Route One Investment Company which amassed $185.8 million worth of shares. Eminence Capital, Melvin 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 38.74% of its 13F portfolio. Route One Investment Company is also relatively very bullish on the stock, dishing out 5.23 percent of its 13F equity portfolio to TPX.

Due to the fact that Tempur Sealy International Inc. (NYSE:TPX) has experienced declining sentiment from the smart money, we can see that there is a sect of hedgies who were dropping their full holdings heading into Q1. It’s worth mentioning that Gregg Moskowitz’s Interval Partners dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $12.4 million in stock, and Brian Scudieri’s Kehrs Ridge Capital was right behind this move, as the fund sold off about $11.6 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 3 funds heading into Q1.

Let’s check out 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). All of these stocks’ market caps are closest to TPX’s market cap.

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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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 5.3% in 2021 through March 19th but still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on TPX as the stock returned 46.5% since the end of December (through 3/19) 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.

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

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