Five Furniture Stocks Hedge Funds Like

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.

#3. Williams-Sonoma Inc. (NYSE:WSM)

 – Investors with long positions (as of March 31): 31

 – Aggregate value of investors’ holdings (as of March 31): $280.74 Million

Williams-Sonoma Inc. (NYSE:WSM) received a lot of attention from the segment of the hedge fund industry monitored by Insider Monkey during the first quarter, as the number of asset managers invested in the company increased to 31 from 21 quarter-over-quarter. However, as with Bed Bath & Beyond, the overall value of those managers’ equity investments in Williams-Sonoma plunged quarter-over-quarter, by 57%, only partially owing to a 5% drop in the company’s stock. Therefore, the hedge funds tracked by our team, which owned 6% of the company’s shares, were actually fleeing the high-end retailer, which sells goods for the home. Morningstar analysts believe the home furnishings retailer is currently trading at a discount, claiming that the company’s operating margin could keep rising at a higher than expected rate due to rewarding spending on e-commerce and supply chain initiatives. Jim Simons’ Renaissance Technologies reported owning 731,700 shares of Williams-Sonoma Inc. (NYSE:WSM) during the latest round of 13Fs.

#2. Tempur Sealy International Inc. (NYSE:TPX)

 – Investors with long positions (as of March 31): 33

 – Aggregate value of investors’ holdings (as of March 31): $1.21 Billion

Tempur Sealy International Inc. (NYSE:TPX) lost some appeal among the hedge funds followed by the Insider Monkey team during the January-to-March quarter, as the number of funds invested in the company dropped to 33 from 36 quarter-over-quarter. Meanwhile, the aggregate value of those funds’ equity investments in Tempur Sealy rose to $1.21 billion from $1.13 billion despite a nearly 14% drop in the value of the company’s shares. Hence, in complete contrast to the previous two stocks, hedge funds were actually bullish on the company during the first quarter, despite a few firms closing small stakes. The market capitalization of the world’s largest bedding provider has declined by nearly 13% since the start of 2016. While some previously believed that mattress providers would be immune to the fast-growing influence of e-commerce, Tempur Sealy has been facing increasing competitive pressure from online mattress sellers shipping mattresses to customers in small-sized boxes. Rob Citrone’s Discovery Capital Management had 2.62 million shares of Tempur Sealy International Inc. (NYSE:TPX) in its portfolio at the end of March.

#1. Mohawk Industries Inc. (NYSE:MHK)

 – Investors with long positions (as of March 31): 49

 – Aggregate value of investors’ holdings (as of March 31): $2.32 Billion

Our data shows that Mohawk Industries Inc. (NYSE:MHK) fell out of favor with the asset managers monitored by Insider Monkey during the first quarter of the year, as the number of firms with stakes in the company fell to 49 from 55 quarter-over-quarter. Correspondingly, the aggregate value of those stakes shrank to $2.32 billion from $2.75 billion. It should be noted that those 49 asset managers hoarded roughly 16% of the company’s outstanding shares. The shares of the flooring manufacturing company for residential and commercial customers are 4% in the green so far this year. Mohawk Industries posted net sales of $2.17 billion for the three months that ended April 2, up from $1.88 billion reported a year earlier. The increase was primarily driven by higher sales volume from acquisitions, as well as higher legacy sales. Dan Loeb’s Third Point LLC reported ownership of exactly 2.00 million shares of Mohawk Industries Inc. (NYSE:MHK) in its latest 13F filing.

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