Can Investing in the Sleep Industry Give Your Portfolio a Better Night’s Sleep?

Are you getting enough sleep?

If you’re like most people, probably not. According to the National Sleep Foundation, adults age 18 to 64 need seven to nine hours of sleep a night, while those over 65 need between seven and eight hours. However, slightly more than 35% of U.S. adults report sleeping for less than seven hours per night on average.

The sleep industry is booming, thanks to demographic changes and the impact of the stay-at-home lifestyle that drove folks to improve every aspect of their home lives. Because of this, the performance of sleep-industry stocks is anything but a yawner.

Strong Performance in Mattress Stocks

Old-school sleep companies such as Tempur Sealy (TPX) and SleepNumber (SNBR) are sharing a crowded space with the bed-in-a-box firms Purple (PRPL) and Casper (CSPR).

Most of these stocks performed well during 2020. Michael Kealy, education coach at TD Ameritrade, suggested their strong performance is due in part to home goods being bought up as part of the “stay-at-home” trade.

Mattresses don’t come cheap. The Sleep Foundation noted in 2020 that mid-range mattress prices for a queen-sized bed start around $1,000. Several factors affect prices, including materials and construction and whether you buy online or in stores—and box springs and other accessories can push those costs even higher.

There are several mattress companies, but there aren’t any pure-play publicly traded pillow companies. Many of the upscale mattress brands often throw pillows in with a bed purchase, Kealy said.

Medical Devices, Sleep Enhancers, and Wearable Technology Stocks

Getting a good night’s rest isn’t just nice; it’s economically important. The Sleep Foundation reported that insufficient sleep has an estimated economic impact of more than $411 billion each year in the United States, showing that sleeplessness affects real money.

Our inability to sleep could be due to several factors—insomnia, late-night shifts, stress, and apnea all affect sleep. Some of it can be cured with better “sleep hygiene” such as avoiding caffeine in the afternoons, not imbibing too much at night, and turning off digital devices before bedtime.

The sleep market for wearable devices, including activity and sleep trackers, is expected to reach over $62 billion in 2021, according to the Sleep Foundation. Additionally, in a study of adults in the United States, 28.2% said that they used a smartphone app to help keep track of their sleep.

A 2019 study in The Lancet reported “the popularity and capabilities of low-cost consumer sleep trackers that can reliably and accurately measure breathing and snoring sounds during sleep might greatly improve public health by serving as a screening tool for the early detection of sleep-disordered breathing.”

Although not pure-play ideas, some companies in the wearables space include Garmin (GRMN), Apple (AAPL), and Fitbit (FIT).

Many companies are also treating diagnosed sleep disorders like sleep apnea, which is expected to be a growing field. A MarketsandMarkets research report noted the sleep apnea market is expected to grow to $7.5 billion between 2019 and 2024, a 10.7% compound annual growth rate.

“Growth in the sleep apnea devices market can be attributed to factors such as the large pool of undiagnosed sleep apnea patients, growing awareness about the ill effects of untreated sleep apnea, growing usage of oral appliances, technological advancements in sleep apnea devices, considerable venture capital funding, and the increasing number of companies venturing into sleep apnea and oral appliances markets,” the report stated.

Several companies in this field make CPAP masks and other devices: Inspire Medical Systems (INSP), ResMed (RMD), and Itamar Medical (ITMR), for example. New entrants to the publicly traded space include Vivos Therapeutics (VVOS), which had an IPO in December, and Apria (APR), which had an IPO in February.

People have popped pills to get a good night’s rest for as long as they’ve been available. In addition to traditional drug manufacturers, a recent entry into this arena is cannabis, according to Kealy. Although research on both cannabis and its over-the-counter sidekick CBD are extremely limited, that hasn’t stopped people from trying to use the products to get some rest.

Kealy pointed out a few stock companies that might fit the bill include Canopy Growth (CGC) and Aphria (APHA), which is set to merge with competitor Tilray (TLRY).

Many bed stocks in the sleep industry performed well post pandemic, just like much of the rest of the stock indices. But with Americans growing older and likely not getting much more rest, sleep stocks may make it easier to catch those ZZZs and get a good night’s sleep.