ZZ for Sleep at Night Factor, Yielding 7.40%

Sealy Corporation (ZZ) produces mattresses and advertisements for mattresses that have basically made its "Posturepetic" brand a household name. What's more, its dropped from the 15 dollar per share range to below 4, which places its yield into The Yield Hoe nation. With the way its chart and these overall equity markets looks, having a good place to crawl into the fetal position is bound to be a growth trade.

And sure enough, speaking of growth, you'll find that ZZ's PEG ratio is .87 worth of earnings for its growth rate. It's PE ratio is just 5.40. It has about $750 million in debt and $40 million in cash on hand, with net income of $66 million.

Moverover, ZZ has a beta of .34, which gives is greater risk adjusted returns than stocks that are more synicronized with the market, according to Smartmoney Price checker, a very cool spreadsheet that makes easy work of estimating underlying values (see the links on the right).

It's trading off 69% from its high on the year. Why? On its recent conference call, CEO Larry Rogers said the bed biz isn't doing so well for bedding costing more than 1000 dollars:

Let me start by discussing the domestic bedding industry, retail mattress conditions continue to erode particularly at price points above $1,000. We do not believe industry’s trends have yet stabilized and US consumer sentiment continues to be weak which is taking a toll on the industry.

This certainly squares with all the consumer gloom and doom you'll see in the retail markets thats turned this bear loose in the circus tent. But he goes on to say:

Our Canadian sales have slowed but remain healthy and we continue to experience strength in our operations in Mexico, South America and Asia joint venture during the third quarter.

We believe Sealy’s diversified geographic presence leaves us better positioned in the context of this environment to emerge with a stronger presence when the market turns.

So, if you're looking for a place to park your money at more than 7%, ZZ may do it, even if its "sleep at night factor" is about as high as high the kind of retail that sells to folks that can afford a $1,000 dollar mattress.

Buy 200 shares of ZZ now, and within 2 years, you may be able to buy a new Posturepedic, from the proceeds, if the end of the world does not come, and it returns to its pre-crash trading range of more than 10 per share (that would of course bring its yield back down, and well outside The Yield Hoe zone, which would trigger a sale, without capital gains if you've had to sell down for margin calls).



Speaking of Sleeping, listen to Snakes Can't Sleep by The Lounge Lizards: