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Hedge Funds Are Dumping Tempur Sealy International Inc. (TPX)

Asma UL Husna

We at Insider Monkey have gone over 752 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of Tempur Sealy International Inc. (NYSE:TPX) based on that data.

Tempur Sealy International Inc. (NYSE:TPX) was in 29 hedge funds' portfolios at the end of the third quarter of 2019. TPX has seen a decrease in support from the world's most elite money managers in recent months. There were 33 hedge funds in our database with TPX holdings at the end of the previous quarter. Our calculations also showed that TPX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_25717" align="aligncenter" width="440"] Steven Cohen of Point72 Asset Management[/caption]

Steven Cohen of Point72 Asset Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a peek at the recent hedge fund action encompassing Tempur Sealy International Inc. (NYSE:TPX).

How have hedgies been trading Tempur Sealy International Inc. (NYSE:TPX)?

Heading into the fourth quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TPX over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

TPX_dec2019

The largest stake in Tempur Sealy International Inc. (NYSE:TPX) was held by H Partners Management, which reported holding $617.6 million worth of stock at the end of September. It was followed by Route One Investment Company with a $293 million position. Other investors bullish on the company included Point72 Asset Management, Scopus Asset Management, and Two Sigma Advisors. 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 71.99% of its portfolio. AWH Capital is also relatively very bullish on the stock, earmarking 9.77 percent of its 13F equity portfolio to TPX.

Because Tempur Sealy International Inc. (NYSE:TPX) has faced a decline in interest from hedge fund managers, we can see that there lies a certain "tier" of fund managers who sold off their positions entirely by the end of the third quarter. At the top of the heap, Mark T. Gallogly's Centerbridge Partners said goodbye to the biggest position of all the hedgies watched by Insider Monkey, totaling about $132.5 million in stock, and Ryan Frick and Oliver Evans's Dorsal Capital Management was right behind this move, as the fund dumped about $36.7 million worth. These transactions are important to note, as total hedge fund interest was cut by 4 funds by the end of the third quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Tempur Sealy International Inc. (NYSE:TPX) but similarly valued. We will take a look at MSA Safety Incorporated (NYSE:MSA), VEON Ltd. (NASDAQ:VEON), Janus Henderson Group plc (NYSE:JHG), and Affiliated Managers Group, Inc. (NYSE:AMG). This group of stocks' market valuations are closest to TPX's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MSA,9,51906,-5 VEON,11,44206,-1 JHG,14,183137,-1 AMG,20,446109,0 Average,13.5,181340,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $181 million. That figure was $1355 million in TPX's case. Affiliated Managers Group, Inc. (NYSE:AMG) is the most popular stock in this table. On the other hand MSA Safety Incorporated (NYSE:MSA) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Tempur Sealy International Inc. (NYSE:TPX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on TPX, though not to the same extent, as the stock returned 9.9% during the fourth quarter (through the end of November) and outperformed the market as well.

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

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