Why These 3 Stocks Bounced Up Today

A normally sleepy industry announced some big news on Friday. A bedding industry trade group, the International Sleep Products Association, stated that its "April Bedding Barometer" indicated increases in sales compared to last year. And this news has shares of mattress retailers springing up.

Shares of Sealy (NYSE: ZZ  ) , Select Comfort (Nasdaq: SCSS  ) , and Tempur Pedic International (NYSE: TPX  ) were all up roughly 4% on Friday. By comparison, it was a relatively flat day for the market; the SPDR S&P 500 (NYSE: SPY  ) , a proxy for the S&P 500, remained relatively unchanged.

This recent announcement comes on the heels of some interesting industry dynamics. In the $4.6 billion U.S. wholesale mattress market, traditional mattress manufacturers, such as Sealy, have been tussling with high-end makers of memory-foam mattresses. The most notable manufacturers of memory-foam mattress include Select Comfort and Tempur Pedic International.

Memory-foam mattresses comprise the fastest-growing segment of the market. In the past eight years, market share for memory foam increased from 14% to nearly 20%. Sealy, which was late to the memory foam segment of the market, has been punished for not jumping on this high-end segment sooner.

Company

Mattress Brands

YTD Return

3-Year Return

Sealy Sealy Posturepedic Stearns and Foster (7.4%) (23.3%)
Select Comfort Sleep Number 19.9% 2557%
Tempur Pedic International TEMPUR-Cloud TEMPUR-Contour (14.6%) 328.5%

Sources: Company websites, The Motley Fool.

One of my Foolish colleagues feels so strongly about Tempur Pedic, in particular, he thinks the company should aggressively buy back shares. I agree. It currently trades near its 52-week low, has great growth potential, and appears undervalued.

The affluent -- and those who value sensational slumber enough to fork over a few grand -- have to rest their heads somewhere. I view the memory-foam mattresses market well-poised for further growth, and I specifically like Tempur Pedic.

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Fool contributor Nicole Seghetti does not own shares in any of the companies mentioned in this article. She enjoys getting a good night's sleep. The Motley Fool owns shares of Tempur Pedic International. The Motley Fool has sold shares of SPDR S&P 500 short. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On May 25, 2012, at 3:42 PM, Ronz8In wrote:

    Have you ever slept on a Tempur Pedic bed? Or a Select Comfort? They are completely different, and one is MUCH more comfortable (and much less weird and smelly).

  • Report this Comment On May 25, 2012, at 3:46 PM, seghetti wrote:

    Actually, yes. I own a memory foam matress on which I've enjoyed many nights of sweet, restful slumber.

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