U.S. Markets closed

Here’s What Hedge Funds Think About Sleep Number Corporation (SNBR)

Reymerlyn Martin

Insider Monkey finished processing more than 700 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of December 31st, 2018. What do these smart investors think about Sleep Number Corporation (NASDAQ:SNBR)?

Is Sleep Number Corporation (NASDAQ:SNBR) undervalued? The smart money is betting on the stock. The number of long hedge fund positions rose by 4 in recent months. Our calculations also showed that SNBR isn't among the 30 most popular stocks among hedge funds. SNBR was in 18 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 14 hedge funds in our database with SNBR positions at the end of the previous quarter.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

BlueMountain Capital Management's Returns, AUM and Holdings

We're going to analyze the recent hedge fund action encompassing Sleep Number Corporation (NASDAQ:SNBR).

What does the smart money think about Sleep Number Corporation (NASDAQ:SNBR)?

At Q4's end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in SNBR a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

SNBR_apr2019

More specifically, D E Shaw was the largest shareholder of Sleep Number Corporation (NASDAQ:SNBR), with a stake worth $23.5 million reported as of the end of December. Trailing D E Shaw was GLG Partners, which amassed a stake valued at $15 million. Winton Capital Management, Millennium Management, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, key money managers have been driving this bullishness. Winton Capital Management, managed by David Harding, established the largest position in Sleep Number Corporation (NASDAQ:SNBR). Winton Capital Management had $10.5 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $2.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Jim Simons's Renaissance Technologies, Peter Algert and Kevin Coldiron's Algert Coldiron Investors, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Sleep Number Corporation (NASDAQ:SNBR) but similarly valued. These stocks are Engility Holdings Inc (NYSE:EGL), Installed Building Products Inc (NYSE:IBP), AZZ Incorporated (NYSE:AZZ), and Cryolife Inc (NYSE:CRY). 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 EGL,14,72165,-3 IBP,8,125553,-1 AZZ,15,40118,1 CRY,11,26077,3 Average,12,65978,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $76 million in SNBR's case. AZZ Incorporated (NYSE:AZZ) is the most popular stock in this table. On the other hand Installed Building Products Inc (NYSE:IBP) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Sleep Number Corporation (NASDAQ:SNBR) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SNBR wasn't nearly as popular as these 15 stock and hedge funds that were betting on SNBR were disappointed as the stock returned 15.1% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

Related Content