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Is SNBR A Good Stock To Buy Now?

Reymerlyn Martin
·6 min read

At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Sleep Number Corporation (NASDAQ:SNBR) makes for a good investment right now.

Is SNBR a good stock to buy now? The best stock pickers were becoming more confident. The number of long hedge fund positions improved by 2 lately. Sleep Number Corporation (NASDAQ:SNBR) was in 21 hedge funds' portfolios at the end of September. The all time high for this statistic is 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SNBR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most shareholders, hedge funds are seen as worthless, old investment tools of years past. While there are greater than 8000 funds trading today, We hone in on the upper echelon of this group, approximately 850 funds. Most estimates calculate that this group of people control most of the hedge fund industry's total asset base, and by monitoring their highest performing stock picks, Insider Monkey has come up with various investment strategies that have historically beaten the broader indices. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Michael Gelband of ExodusPoint Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 let's take a gander at the key hedge fund action encompassing Sleep Number Corporation (NASDAQ:SNBR).

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

At the end of September, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SNBR over the last 21 quarters. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital has the largest position in Sleep Number Corporation (NASDAQ:SNBR), worth close to $37 million, accounting for 0.1% of its total 13F portfolio. The second largest stake is held by D E Shaw, managed by D. E. Shaw, which holds a $36.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that are bullish encompass Dmitry Balyasny's Balyasny Asset Management, Francois Rochon's Giverny Capital and Anthony Joseph Vaccarino's North Fourth Asset Management. In terms of the portfolio weights assigned to each position North Fourth Asset Management allocated the biggest weight to Sleep Number Corporation (NASDAQ:SNBR), around 2.39% of its 13F portfolio. Giverny Capital is also relatively very bullish on the stock, dishing out 0.96 percent of its 13F equity portfolio to SNBR.

As industrywide interest jumped, specific money managers have been driving this bullishness. North Fourth Asset Management, managed by Anthony Joseph Vaccarino, created the most valuable position in Sleep Number Corporation (NASDAQ:SNBR). North Fourth Asset Management had $9.8 million invested in the company at the end of the quarter. Renaissance Technologies also made a $3.4 million investment in the stock during the quarter. The following funds were also among the new SNBR investors: Michael Gelband's ExodusPoint Capital, Minhua Zhang's Weld Capital Management, and Schonfeld Strategic Advisors.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Sleep Number Corporation (NASDAQ:SNBR) but similarly valued. These stocks are CSG Systems International, Inc. (NASDAQ:CSGS), Monro Inc (NASDAQ:MNRO), Marten Transport, Ltd (NASDAQ:MRTN), Patrick Industries, Inc. (NASDAQ:PATK), Purple Innovation, Inc. (NASDAQ:PRPL), Heron Therapeutics Inc (NASDAQ:HRTX), and World Fuel Services Corporation (NYSE:INT). This group of stocks' market values are similar to SNBR's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSGS,22,153213,0 MNRO,14,18079,3 MRTN,19,58010,0 PATK,17,94066,2 PRPL,36,724349,8 HRTX,17,274649,-4 INT,16,79951,-2 Average,20.1,200331,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $200 million. That figure was $146 million in SNBR's case. Purple Innovation, Inc. (NASDAQ:PRPL) is the most popular stock in this table. On the other hand Monro Inc (NASDAQ:MNRO) is the least popular one with only 14 bullish hedge fund positions. Sleep Number Corporation (NASDAQ:SNBR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SNBR is 52.9. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on SNBR as the stock returned 68.6% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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