Google the words “fitness during a pandemic,” and you get 13,200 results. That might not seem like a lot, but I’m pretty sure you wouldn’t have gotten nearly as many results a year ago from the same search. Google the words “fitness stocks to buy,” and you don’t get nearly as many hits.
One way to broaden the selection of stocks to buy is to change your search term. I entered “Robinhood fitness stocks” and came up empty. I took out the quotation marks, and Google spits out more than one million results.
Now we’re getting somewhere.
The very first result was a list of 81 health and wellness stocks covered by Robinhood. From this list, I selected seven fitness-related stocks to buy for the pandemic and beyond.
Who says you can’t benefit from the pandemic without getting up off the couch? All seven of these stocks will make you money over the long haul.
- Lululemon (NASDAQ:LULU)
- Fox Factory Holdings (NASDAQ:FOXF)
- Johnson Outdoors (NASDAQ:JOUT)
- Shimano (OTCMKTS:SMNNY)
- Acushnet (NYSE:GOLF)
- Pool Corp. (NASDAQ:POOL)
- Global X Health & Wellness Thematic ETF (NASDAQ:BFIT)
No calories required.
Fitness Stocks to Buy: Lululemon (LULU)
I can remember a time when analysts wanted nothing to do with the Vancouver-based athletic apparel brand. Now, of the 35 analysts who cover the stock, 21 have it as a “buy,” with only one analyst suggesting it should be sold. The average target price for LULU is $372.74, providing investors with plenty of upside over the next 12 months.
In Aug. 2016, I suggested that Lululemon’s stock would become one of the best-performing S&P 500 stocks of the next decade. Four years in, LULU has yet to join the index but is up 287% through Sept. 16. By comparison, the index has gained 56%.
Recently, Barron’s suggested that Peloton Interactive’s (NASDAQ:PTON) excellent earnings report was fantastic news for LULU stock because it suggests its acquisition of Mirror for $500 million won’t be a bust.
“Those same trends [home workouts] should benefit Mirror as well. As we head into traditional cold and flu season without an effective treatment or vaccine yet approved for Covid-19, fewer people are likely to return to gyms,” Barron’s stated.
“As other recent earnings have shown, consumers are willing to spend on items that make their at-home life more enjoyable, and that includes exercise equipment. Habits formed over months can be sticky, and if we’re on the cusp of a shift in the fitness industry, Mirror looks like a good place to be.”
As fitness stocks go in the long-term, I believe LULU is a much better buy than Peloton. I guess we’ll see in five or six years.
Fox Factory Holdings (FOXF)
In early August, I wrote a column about 10 small-cap stocks to buy that will likely become large-caps over the next few years.
One of the names on the list was Fox Factory Holdings, a Georgia-based company that manufactures shock absorbers and struts for bikes, all-terrain vehicles, side-by-sides, snowmobiles, and all kinds of vehicles used for off-road and on-road activities.
What’s that got to do with fitness?
Well, even though its broadened its horizons, Fox Factory got its start on motocross and non-powered bikes back in the 1970s. Fitness was a requirement to experience their products up close and personal.
If there’s a diamond in the rough in this list of seven stocks, Fox Factory would be it.
“Over the past five years, FOXF stock has generated an annualized total return of 44%, four times the entire U.S. market,” I wrote on Aug. 7.
Up 598% since its IPO in 2013, I expect it will continue to outperform the markets. Buy on a pullback below $100.”
Well, it’s now trading below $100, and despite a harsh second-quarter report in early August, it’s got an excellent future ahead of it, putting FOXF in the buy zone.
Johnson Outdoors (JOUT)
Have you heard of SC Johnson? It’s a privately-owned, family-controlled consumer products company in Racine, Wisconsin. Its products include Glade, Fantastik, Pledge, Shout, Windex, and many others.
Samuel Curtis Johnson Jr. ran SC Johnson from 1967 to 1988. One of his actions as chief executive was to diversify into other businesses. In 1970, Johnson founded Johnson Outdoors to create top-quality recreational products for customers to enjoy the great outdoors. His daughter, Helen Johnson-Leipold now runs the company.
JOUT flies under the radar for most investors, but its stock’s achieved an annualized total return of 23.8% over the past decade.
I expect that Johnson Outdoors and its family of brands (Minn Kota, Humminbird, Eureka, etc.) will go over $1 billion in market capitalization in 2021. It, too, is a diamond in the rough when talking about fitness and recreation stocks.
I’ve seen a lot of bikes on the streets during the pandemic. It’s a great way to get exercise without getting to close to people. Shimano generates 80% of its operating income from bike components. Perhaps that’s why Shimano stock has a year to date total return of almost 24%.
As a result of the pandemic, Shimano chief executive officer, Yozo Shimano, has said that the company will revisit its supply chain in light of the shutdowns that took place at its plants in Singapore and Malaysia.
In May, Shimano’s stock hit an all-time high, as news reports circulated suggesting people would turn to bikes during the pandemic.
“Investors are betting that more and more people will turn to bicycles as a way to avoid congested public transportation as France, the U.K. and other countries start to ease lockdown measures,” Bloomberg stated.
One area in which Shimano could benefit from increased sales of gears and brakes is e-bikes.
“Many countries across Europe have fully embraced electric bikes. In Germany, sales rose by 36% to nearly one million units in 2018. Almost a million more were sold in Germany in the first half of 2019, while more than half of all adult bikes sold in the Netherlands in 2018 were electric,” Marketwatch reported Sept. 8.
Shimano sells almost three-quarters of the world’s bicycle gears and brakes. If bikes continue to have a renaissance during the pandemic and beyond, look for Shimano’s shares to move even higher over the next few months.
Golf-related stocks have become a hot commodity in 2020 as Americans look to do anything that’s outdoors. If you bought Acushnet stock at the March lows, you’d be sitting on a 59% unrealized gain.
Acushnet, the maker of Titleist golf clubs, Titleist golf balls, and Footjoy golf shoes, went public on Oct. 27, 2016, at $17 a share. It’s up 98% in the four years since. Over the same period, Callaway Golf (NYSE:ELY) is up 93% over the same period.
By comparison, the S&P 500 is up 64% over the same period. Golf is hot once more.
“The golf industry has been doing exceptionally well during the pandemic. Golf is benefiting from [an] increase in participation of young people who refrained from sports like football in adherence to social distancing protocols,” Zacks reported on Sept. 15.
“Per National Golf Foundation, national rounds played increased 13.9% in June, which highlights the fact that 8 million more rounds were played in June compared with previous year. According to the NPD Group, golf equipment sales increased by 51% in June.”
Until Covid-19 goes away, I expect Acushnet and Callaway to continue to benefit from this trend to want to be outdoors.
Pool Corp. (POOL)
Pool Corp. is the world’s largest wholesale distributor of swimming pool supplies and equipment. Founded in 1993, it changed its name from SCP Pool (South Central Pool Supply) to Pool Corp. in May 2006. Based in Louisiana, it is a prime example of an industry consolidator.
In the five years between 2014 and 2019, Pool grew its sales by 42% to $3.2 billion and its adjusted EBITDA by 79%, to $382 million. It now generates 6% of its revenue outside North America, and that number is growing by the day.
How much has POOL made investors over the years?
If you invested $10,000 in October 1995, it was worth $2.95 billion at the end of 2019. That crushed both its benchmark index, the S&P MidCap 400, and the S&P 500.
With the weather continuing to get hotter by the year, I expect the demand for swimming pools to continue unabated for years to come. The best part about swimming pools is that once you build them, you’ve got to maintain them, which means plenty of recurring revenue.
Are you not convinced? Try selling your house with gross-looking pool water. It’s not possible.
Covid-19 or not, this is an excellent fitness-related stock to own for the long haul.
Global X Health & Wellness Thematic ETF (BFIT)
When it comes to thematic exchange-traded funds, nobody does it better than Global X. Its Health & Wellness ETF is a perfect example.
BFIT tracks the performance of the Global Health & Wellness Thematic Index, a collection of stocks that transcends sectors, industries, and regions, exposing unit holders to the health & wellness theme.
The ETF currently has 58 holdings with 71% of the $16.4 million in total net assets invested in consumer discretionary stocks, another 22% in consumer staples, and the remainder in health care and industrials.
Two of the fitness stocks recommended in this article — Lululemon and Shimano — are top 10 holdings. Other big ones include Nike (NYSE:NKE) and Adidas (OTCMKTS:ADDYY). The top 10 holdings account for 33% of the ETF’s assets.
The ETF’s management expense ratio is a reasonable 0.50%. Since its inception in May 2016, it has an annualized total return of 10% through Aug. 31. Year to date, it’s taken a bit of pause, up just 1.2%.
Long-term, if you want to bet on fitness stocks, this is an excellent way to do it.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.