Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Sleep Number Corporation (NASDAQ:SNBR) has experienced an increase in enthusiasm from smart money of late. Our calculations also showed that snbr isn't among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman, GLG Partners[/caption]
Let's take a peek at the new hedge fund action surrounding Sleep Number Corporation (NASDAQ:SNBR).
Hedge fund activity in Sleep Number Corporation (NASDAQ:SNBR)
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards SNBR over the last 15 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, D E Shaw held the most valuable stake in Sleep Number Corporation (NASDAQ:SNBR), which was worth $57.6 million at the end of the first quarter. On the second spot was GLG Partners which amassed $26.8 million worth of shares. Moreover, Renaissance Technologies, Millennium Management, and Arrowstreet Capital were also bullish on Sleep Number Corporation (NASDAQ:SNBR), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, some big names have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most valuable position in Sleep Number Corporation (NASDAQ:SNBR). Arrowstreet Capital had $19.8 million invested in the company at the end of the quarter. Lee Ainslie's Maverick Capital also initiated a $1.7 million position during the quarter. The other funds with brand new SNBR positions are Matthew Hulsizer's PEAK6 Capital Management, Hoon Kim's Quantinno Capital, and Joel Greenblatt's Gotham Asset Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Sleep Number Corporation (NASDAQ:SNBR) but similarly valued. We will take a look at Noble Midstream Partners LP (NYSE:NBLX), MOGU Inc. (NYSE:MOGU), Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), and ICF International Inc (NASDAQ:ICFI). All of these stocks' market caps are similar to SNBR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NBLX,4,7623,-2 MOGU,1,440,-1 MNTA,18,259500,-2 ICFI,17,44992,0 Average,10,78139,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $192 million in SNBR's case. Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) is the most popular stock in this table. On the other hand MOGU Inc. (NYSE:MOGU) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Sleep Number Corporation (NASDAQ:SNBR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately SNBR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SNBR were disappointed as the stock returned -25.8% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.