These fitness stocks cater to this era where you can’t safely go to the gym or swim at your local pool
Going to the gym isn’t really an option these days. Neither are in-person yoga classes, spin classes, or even venturing to the nearest public swimming pool to get in a few laps. Such is the weird state of the world in 2020-21, when being around too many people is faux pas and sharing sweat with others is considered lunacy. To stay in shape, you mostly need to exercise at home. That’s been big business for certain fitness-related companies—and fitness stocks are booming as a result.
Some fitness stocks, that is.
Planet Fitness (PLNT), Foot Locker (FL), any other fitness enterprise whose business model is predicated on human beings entering their stores/gyms—those companies aren’t doing so well. But the companies that cater to the working-out-from-home spike are benefitting from Covid-19.
A couple of the names on this list are all-weather fitness stocks—companies so large and familiar that they tend to do well regardless of whether people are exercising at home or going to the gym. But the pandemic has certainly helped them, as more Americans are turning to exercise for both their physical and mental health—and to shake the monotony and boredom of being at home most of the time. Hiking a mountain or going for a long bike ride or brisk jog are great ways to get out of the house and get some fresh air.
However, another name on this list peddles a product that doesn’t require fresh air and should continue to perform well in the remaining month or two (depending on where you live) of winter.
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So, without further ado, here are four fitness stocks that have gotten a nice bump in recent months, and should remain in an uptrend as long as the pandemic rages on—and perhaps beyond…
4 Fitness Stocks to Consider
Fitness Stock #1: Peloton (PTON)
As I mentioned earlier, your local spin class is probably closed. But Peloton brings the spin class to you. It’s a stationary bike (the company also sells treadmills) but with an interactive screen that enables users to stream live cycling classes, or even yoga classes, from the comfort of their home. How prescient that business model has become!
Despite the hefty price tag ($2,245) and monthly membership fees ($39 a month), Pelotons have been selling like hotcakes since Covid began. The company grew revenues by 128% in the latest quarter, and analysts expect Peloton to turn decisively profitable ($0.31 EPS) for the first time this year. PTON stock’s momentum has slowed in the last couple months, but it’s still up more than 400% in the last year. With shares currently trading at the low end of their 143-to-167 two-month range, this looks like a good entry point into an excellent growth story.
Fitness Stock #2: Lululemon (LULU)
This is one of those all-weather fitness companies I was talking about. Lululemon has virtually cornered the market on yoga wear and “athleisure” apparel; you can’t walk into any grocery store or coffee shop without seeing someone wearing Lululemon yoga pants. And the company has bounced back swiftly after initially taking it on the chin early in the pandemic. Sales (+22%) and earnings (+13%) both grew at double-digit rates in the most recent quarter, just two quarters removed from double-digit declines in both the top and bottom lines when lockdowns began last spring and America had to learn how to live in a Covid world. The next earnings are due out in March, and analysts are expecting continued growth (+18 sales, +9% EPS).
As for LULU stock, it’s up 38% in the last year, though it’s made very little net progress since last summer. In the middle of a narrowing trading range, now might be a decent time to start a small position in a growth stock whose long-term trend is still clearly up.
Fitness Stock #3: Nike (NKE)
Speaking of all-weather companies … do I even need to explain this one? Even with hard-charging upstarts like Lululemon and Under Armour entering the sports apparel fray in recent years, Nike is still king by a long shot, with a larger market share (18.3%) than its four closest competitors (Lululemon and Under Armour included) combined.
While Nike’s sales were down sharply in the spring quarter of 2020, it’s bounced back nicely since, with 11.5% and 12.7% EPS growth in the last two quarters. And Nike stock has been just fine, rising 43.5% in the last year (more than double the 16.8% rise in the S&P 500). In fact, it’s comfortably outpaced the market over the last one-, two-, and five-year periods.
Nike isn’t growing the way it once was, of course. But it’s still a reliable outperformer, and even a pandemic can’t keep it down.
Fitness Stock #4: Dorel Industries (DIIBF)
This one’s much more speculative, and thus only for the adventurous investor. It’s a Canadian micro-cap ($400 million) bicycle maker that trades over the counter. And yet, it’s been on a tear since Covid began, zooming from less than a dollar a share last April to 12.42 now. Of course, that share price is well below its 2016 highs above 30, so DIIBF is plenty volatile. But the upward trend is clear and unrelenting, and the company is finally profitable.
It’s not a pure play on the exercise-from-home craze. In addition to making road and mountain bikes under popular brand names such as Schwinn and Cannondale, it also makes car seats and toys for babies and toddlers, and home furnishings such as couches and rugs. However, that diversification could be viewed as an advantage, especially now.
Given the furious run-up of late, and the fact that shares still trade at less than half their 2016 highs, DIIBF could be worth taking a flyer on, with a small position size.
Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.Sign up now!
*This post has been updated from an original version, published in 2020.