Gym stocks were among some of the biggest winners in the novel coronavirus pandemic. As more Americans were faced with months away from their local fitness centers, all of a sudden the cardio-obsessed Peloton (NASDAQ:PTON) wife didn’t look nearly so crazy.
However, it seems the bug really never went away. A consistent theme on my social media timeline was the desire of Americans to get back to the gym. It exceeded the cries of people who wanted, or needed, a haircut. It stands a bit in contrast to the statistic from the International Health, Racquet & Sportsclub Association (IHRSA) that approximately 28% of gym members are expected to cancel their memberships.
However, in 2018, the IRHSA reported that the fitness industry was worth $94 billion. And the number of health club members climbed more than 37% to 62.4 million in the decade between 2008 and 2018.
Those are the kind of numbers that can cause the heart rate of investors to rise. But the field of publicly traded gym stocks was not extensive to begin with. And the field got a little narrower when 24 Hour Fitness filed for Chapter 11 bankruptcy protection caused by the forced shutdown stemming from the novel coronavirus.
Here are two pure play gym stocks, and one related fitness stock, that can help power your portfolio.
Gym Stocks to Buy: Planet Fitness (PLNT)
The first stock on the list is Planet Fitness. This is the only pure-play gym stock on a U.S. exchange. Although the pandemic forced all Planet Fitness locations to close, gyms have a much smaller breakeven point than another industry such as airlines. Therefore, the gyms don’t need to have 100% membership to perhaps break even.
According to CEO Chris Rondeau, the fitness chain was seeing similar trends to last year despite having no marketing spend and a “soft opening” in many states. That was a month ago. And since that time, PLNT stock is up nearly 10%, albeit not without volatility.
The question of course is how much higher can the stock go? There is certainly reason to be cautious. Another national shutdown is unlikely, but gyms could face pressure to reduce hours or maintain more restrictive policies if an area has an outbreak.
From a technical perspective, the stock has cooled since rising to more than $77 per share at the beginning of June. If you believe the stock is worth the $75 price tag it had at the end of 2019, this could be a great opportunity to buy on the dip.
Town Sports International (CLUB)
I said it was slim pickings for gym stocks, and I meant it. Aside from Planet Fitness, Town Sports International is the only publicly traded company in the field. If you haven’t heard of Town Sports or CLUB stock, you’re probably not alone.
A quick tour around the company’s website shows that the company hasn’t been much for public relations. But what I can tell you is that it is trying to carve out a niche in the boutique fitness center experience. The thinking is that many fitness enthusiasts want a middle ground between working out at home and being confined to a big-box gym like Planet Fitness.
Will that work in a post-pandemic world? On the one hand, it would seem to be a compelling story. On the other, since selling for over $13 per share in the middle of 2018 the stock has been on the decline. This suggests that while fitness enthusiasts may want a more custom experience, they may not be willing to pay for that experience.
Investors should pay close attention to what the company says when it reports earnings on June 25. With a stock trading below $1, this could be a steal or a stock that is rapidly becoming worthless.
Nautilus (NLS)
Nautilus has been one of the biggest winners from the national shutdown. NLS stock was treading water prior to the outbreak of the novel coronavirus. Then as millions of Americans were asked or ordered to stay at home, the light bulb went on for investors.
These consumers were still going to go to the gym. They were just going to bring the gym into their home. And that has been very good news for Nautilus.
Will the company continue this trend? Early returns are suggesting it may very well have room to run. The company recently released a new home gym system under the Bowflex brand name and it sold out quickly.
Of course, garage sales are filled with the good intentions that just never took hold. And Nautilus stock has been on the decline since 2016, and even then, the stock wasn’t sniffing its all-time high.
But we live in a world where this time, it really may be different. It’s hard to tell if consumers will feel comfortable going to a gym before a vaccine is available. And that leaves a stock like Nautilus with a long runway to win over customers.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.
