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TheStreet Open House

4 Stocks That Are Real Sleepers in 2012

Stock quotes in this article: TPX, ZZ, MFRM, SCSS

BOSTON (TheStreet) -- Call it mattress madness, but the stocks of companies in the sleep-products industry, comprised of manufacturers and specialty retailers of mattresses, are among the biggest gainers this year.

The four companies in this niche have share-price gains ranging from 28% to 92% this year, versus the S&P 500's 9.6%.

The chief contributors to investors' positive views are that sales will grow as consumer confidence rebounds; that people buying new homes, or just moving, will buy new mattresses for their new residence; and, in a new wrinkle, new types of mattresses that promise an enhanced quality of sleep over that from old-fashioned, box-spring mattress, are gaining in popularity.

There has been particularly strong sales growth over the past quarter, according to industry trade group International Sleep Products Association, which reported that year-over-year unit sales rose 17.5% in February, 16.6% in January and 6.9% in December, after a relatively sleepy 2011 performance.

The new-home/new-mattress link is such a big sales driver for the industry that Goldman Sachs (GS) classifies mattress-makers as part of the building products industry.

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Housing starts and building permits for March are due today.

As for the appeal of new types of mattresses in lieu of box-spring ones, a new-found view on the importance of sleep in aiding health is building, especially among well-heeled baby boomers. As a result, more people are springing for $8,000-plus all-inclusive "sleep systems" as they promise a more comfortable night's sleep.

Tempur-Pedic International (TPX), for example, which has some of the highest-priced sleep systems, reported its sales increased 28% to $1.4 billion in 2011.

Industry representatives say mattresses should be considered "investments" since an individual sleeps fully a third of his life and a quality mattress should last eight to 10 years.

Mattresses with a new approach to catching quality Zs don't rely on springs for support, and they have proved especially attractive to buyers. They include Tempur-Pedic's viscoelastic memory foam mattress and Select Comforts' (SCSS) air-chamber mattresses. The latter come with remote controls allowing bed mates to dial in the firmness they want on their own side.

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Goldman Sachs said in a March 30 research note that mattress sales are "healthy (with) year-over-year gains in both units and average selling price. The increase in selling price is being driven by unit-share gains for the non-inner-spring category. Pricing is likely to remain healthy as non-inner-spring unit share expands, helped by new product introductions."

Serta, the second-largest mattress-maker, and Simmons, another big player, are privately held.

Here are four stocks of mattress makers in inverse order of their share-price gains this year:

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