Furniture retail in the United States represents an important aspect of a big chunk of the nation’s economy, as consumer spending accounts for more than two-thirds of U.S economic activity. The furniture industry is heavily correlated with broader economic conditions, as consumers usually cut back on non-essential spending during periods of economic hardship. Moreover, furniture retail spending also appears to be correlated with trends in housing starts, because individuals purchasing new homes tend to fill them with new furniture. Given that housing starts rose by 6.6% in April, a sign that the housing market is gaining steam after a slow first quarter, one could anticipate furniture stocks to perform relatively well in the foreseeable future. That being said, Insider Monkey will lay out a list of five furniture stocks that the hedge funds tracked by our team favor.
At Insider Monkey, we track around 765 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).
#5. La-Z-Boy Incorporated (NYSE:LZB)
– Investors with long positions (as of March 31): 21
– Aggregate value of investors’ holdings (as of March 31): $84.09 Million
The hedge fund sentiment towards La-Z-Boy Incorporated (NYSE:LZB) increased during the first three months of 2016, as the number of funds in our system with stakes in the company climbed to 21 from 18 quarter-over-quarter. At the same time, the dollar value of those stakes rose to $84.09 million from $71.19 million and totaled 6% of the company’s outstanding shares. The world’s leading producer of reclining chairs and the second-largest U.S manufacturer of residential furniture has seen its market value increase by 8% since the start of 2016. La-Z-Boy Incorporated is currently working on its so-called 4-4-5 store growth initiative, which involves expanding the company’s La-Z-Boy Furniture Galleries store network to 400 stores averaging $4 million in sales per store over the five-year period that started with fiscal year 2014. The company’s network increased by six stores over the nine months that ended January 23, to 331 La-Z-Boy Furniture Galleries stores. Adage Capital Management, founded by Phill Gross and Robert Atchinson, owns nearly 857,000 shares of La-Z-Boy Incorporated (NYSE:LZB) as of March 31.
#4. Bed Bath & Beyond Inc. (NASDAQ:BBBY)
– Investors with long positions (as of March 31): 25
– Aggregate value of investors’ holdings (as of March 31): $314.60 Million
Bed Bath & Beyond Inc. (NASDAQ:BBBY) has received some first quarter love from the hedge funds followed by our team, as the number of funds with long positions in the company rose to 25 from 23 quarter-over-quarter. Nonetheless, the overall value of those positions fell by 48% quarter-over-quarter to $314.60 million, even though Bed Bath & Beyond shares gained 3% in the quarter, so there were some big sellers of the stock and that overran the bulls. The shares of the home goods retailer are down by 6% thus far in 2016. Earlier this year, Bed Bath & Beyond announced the first dividend payment in its 24-year history as a publicly-traded company. The home furnishing retailer declared a quarterly distribution of $0.125, which equates to an annual dividend yield of 1.10%. Moreover, the company doesn’t seem to lack growth opportunities considering that it has been heavily investing in growing its e-commerce business, though it’s not expected to be as profitable as its traditional brick-and-mortar stores. David Harding’s Winton Capital Management has 1.27 million shares of Bed Bath & Beyond Inc. (NASDAQ:BBBY) among its holdings as of the end of March.
We’ll check out the three most popular furniture-related stocks on the next page.