These fitness stocks cater to this era where going to the gym or swimming at your local pool aren’t really options.
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, 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 all 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 winter months.
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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 65% in the prior quarter, and analysts expect triple-digit top-line growth when it reports tonight (September 10). It may be worth waiting to see how the stock reacts to those results in the days ahead. But PTON has plenty of momentum: it’s up 213% year-to-date and has actually been ticking upward as most other growth stocks have retreated in recent days.
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 is coming off a strong quarter.
Lululemon topped sales and earnings expectations in the second quarter, as 97% of its stores around the world have reopened and online sales soaring 157% versus a year ago. As a result, the company beat top-line estimates by 7%, and EPS estimates by 34.5%, though total in-store sales are only about three-quarters of what they were a year ago.
LULU stock didn’t respond well to the earnings beat, perhaps in part because it was up more than 45% year-to-date prior to reporting (now up “only” 37%), or perhaps because CEO Calvin McDonald saying he’s “cautiously optimistic” for the rest of the year wasn’t exactly a ringing endorsement.
Regardless, the long-term trend in Lululemon stock remains up, and this 13% pullback looks like a prime buying opportunity.
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 last quarter, like most retail companies, they’re still expected to grow 4.8% in their current (fiscal 2021) year. And Nike stock has been just fine, rising 14% so far this year (more than double the 5.9% 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 ($288 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 at the beginning of April to 8.70 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 grew earnings by 277% in its latest quarter.
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 little more than a quarter of 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!