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The Home Furnishing sub-industry consists of several small-to-mid cap companies. These companies have significant exposures to the macro economy, such as the housing market, the employment rate, and the consumer credit. Hedge fund managers are among the smartest investors around. They have better judgments over these stocks than most investors do. Here we compile a list of top Home Furnishing stocks that most hedge funds were buying. Investors can use this as a starting point in determining which to buy:

Company

Ticker

No. of hedge fund

Bed Bath & Beyond Inc.

BBBY

29

Tempur-pedic International Inc.

TPX

25

Williams-Sonoma, Inc.

WSM

24

Select Comfort Corporation

SCSS

12

Mohawk Industries, Inc.

MHK

12

Pier 1 Imports, Inc.

PIR

12

H. B. Fuller Company

FUL

11

La-Z-Boy Inc.

LZB

10

1. Bed Bath & Beyond Inc. (NASDAQ:BBBY) operates a chain of retail home furnishing stores. The company returned 17% in 2011 and beat the S&P500’s return of 3% over the same period. More hedge funds – 29 - had the stock in the third quarter, down from 30 in Q2. Total hedge fund investment in the company also decreased, going from $1.24 billion at the end of June to $1.06 billion at the end of September. Stephen Mandel’s Lone Pine Capital had the most shares among the hedge funds we track. The firm boosted its position by 31% and held 5.47 million shares of BBBY as of the end of September.

2. Tempur-pedic International Inc. (NYSE:TPX) is a provider of bedding products. The stock fared well in the past year, returning 30%. The number of hedge funds invested in TPX increased from 22 in the second quarter to 25 at the end of the third quarter, while hedge funds’ total exposure fell from $672 million to $660 million. John Shapiro’s Chieftain Capital increased its position by 5% and had the most shares - 4.83 million - of TPX as of the end of September.

3. Williams-Sonoma, Inc. (NYSE:WSM): Williams-Sonoma is a home products specialty retailer. The stock managed to beat the S&P and returned 9% in 2011. Hedge fund investment in WSM increased in the third quarter, from 20 at the end of June to 24 at the end of September, and the total investment more than doubled from $190 million to $430 million. Stephen Mandel’s Lone Pine Capital was WSM’s largest hedge fund stakeholder in the third quarter. The firm had 5.82 million shares of WSM, which was a new position initiated during the third quarter. Glenn Russell Dubin and Ken Griffin were also among WSM’s large stakeholders (see billionaire Ken Griffin’s top stock picks).

4. Select Comfort Corporation (NASDAQ:SCSS) is a bed manufacturer and retailer. The stock skyrocketed and advanced a whopping 137%. The stock had a mixed path before the third quarter but it suddenly surged in October. The number of hedge funds invested in SCSS decreased from 13 in the second quarter to 12 at the end of September. Total hedge fund investment also fell from $115 million at the end of June to $84 million at the end of September. Phill Gross and Robert Atchinson’s Adage Capital Management had more shares in SCSS than any other hedge funds in the third quarter. The firm boosted its position by 11% and reported nearly 3 million shares.

5. Mohawk Industries, Inc. (NYSE:MHK) is a floor covering products provider for residential and commercial users. The stock returned 4% in the past year and was held by 12 hedge funds in the third quarter. This number was down from 15 in the second quarter. Total hedge fund investment dropped from $386 million to $255 million at the end of September. Ricky Sandler’s Eminence Capital decreased its position by 10% and had 1.32 million shares at the end of September.

6. Pier 1 Imports, Inc. (NYSE:PIR) is an imported decorative home furnishings and gifts provider. The stock increased 31% in the past year. There were 12 hedge funds invested in PIR in the third quarter, with a total volume of $85 million, falling from $124 million invested by 16 hedge funds’ portfolios. Brett Barakett’s Tremblant Capital had the largest chunk of shares of PIR among the hedge funds we track, with 4.66 million shares at the end of the third quarter, up 48% from the previous quarter. Cliff Asness took the second place and had about 1.33 million shares in PIR in the third quarter (see billionaire Cliff Asness’ top stock picks).

7. H. B. Fuller Company (NYSE:FUL) mainly provides adhesives, sealants, paints and other specialty chemical products. The stock gained 13% in 2011 and was owned by 11 hedge funds in the third quarter, down from 16 at the end of June. Total hedge fund investment was also down to $41 million, from $61 million in the second quarter. FUL’s largest hedge fund stakeholder - Chuck Royce’s Royce & Associates – decreased its position by 8% and remained 613 thousand shares in its position as of the end of September (see billionaire Chuck Royce’s top stock picks).

8. La-Z-Boy Inc. (NYSE:LZB) is a reclining chairs producer. The stock gained nearly 32% in 2011. The number of hedge funds that invested in LZB decreased from 12 at the end of June to 10 at the end of the third quarter. Total hedge fund investment decreased from $79 million to $65 million. Robert Bishop’s Impala Asset Management had the most in LZB. The firm increased its position by 6% and had slightly more than 4 million shares of LZB at the end of September.

Source: 8 Home Furnishing Stocks Favored By Hedge Funds