One of the most contentious government mandates in response to the novel coronavirus pandemic was the shutdown or severe limitation of non-essential activities. For many jurisdictions, this included gyms and other health and fitness centers. Naturally, this had an impact on fitness stocks, both positive and negative.
Some publicly traded firms that manufactured products catering to in-home exercise performed very well. While Covid-19 cases are on the decline in the U.S. relative to their January peak, fears remain strong among many people. Frankly, a lot of us are not ready to meet strangers face-to-face. On the other hand, fitness stocks dependent on in-person interaction suffered during the initial onslaught.
Nevertheless, even for the severely affected fitness stocks, hope could be around the corner as the summer season awaits us. First, the biggest irony of the lockdowns was that this represented a Faustian bargain: People can avoid Covid-19 by staying at home all day, but doing so will create or exacerbate other health problems.
A prime example is our waistline. As you know, American health officials have long lamented our general lack of health. Further, it has become a national security concern as up to 75% of American youth are ineligible for military service, in part due to issues like obesity. According to a New York Times article, we may have gained on average approximately two pounds a month. Certainly, this places new emphasis on fitness stocks.
Here’s why so many people are angry: We need to get outside. How quickly we have forgotten that one of the benefits of vitamin D is supporting immune function. And where do you get vitamin D? Sunlight is a very common source. As people recognize the importance of normalization in all aspects of our lives, this dynamic may lift these fitness stocks:
- Peloton (NASDAQ:PTON)
- WW International (NASDAQ:WW)
- Nautilus (NYSE:NLS)
- Planet Fitness (NYSE:PLNT)
- Garmin (NASDAQ:GRMN)
- Big 5 Sporting Goods (NASDAQ:BGFV)
- Town Sports International (OTCMKTS:CLUBQ)
Because this is the internet, let me clarify that I’m in no way impugning the Covid-19 vaccine rollout nor am I suggesting that going outside defeats the SARS-CoV-2 virus. Rather, we humans need a routine for both physical and mental health. Therefore, these fitness stocks enjoy a reasonable upside narrative.
Fitness Stocks to Buy: Peloton (PTON)
If there was a PR winner stemming from the awful pandemic, it would be Peloton. You will recall that social media viciously ripped apart the company’s holiday advertisement, the winter holiday right before Covid-19 ruined everything.
In the controversial ad, millions blasted Peloton for reinforcing unhealthy stereotypes about women and beauty standards. Also, I believe I saw some sociological analyses about patriarchal hegemony. Honestly, I think Peloton had good intentions but ultimately suffered the wrath of the internet. Thank goodness for Covid, huh?
After that little speed bump, PTON stock became one of the hottest names among fitness stocks. At one point, shares closed at just under $163 on Christmas Eve last year. That of course was when coronavirus cases were on their way to reaching unprecedented heights.
Since then, PTON stock has come down significantly, which may tempt contrarians to buy the discount. For one thing, new variants of the virus can come in through anywhere, whether by immigration, tourism or business travel. Hopefully it doesn’t happen, but we could see another resurgence.
Second, some folks may be embracing the pandemic’s de facto justification of their introverted personalities. To compensate for the lack of outside interactions, a Peloton exercise bike may be the perfect solution.
WW International (WW)
According to WW International’s website, its flagship subscription Weight Watchers (which is now rebranded as WW) is the No. 1 doctor-recommended weight-loss program. Even if it was the No. 2 program, WW stock would still be just as relevant as many other fitness stocks.
As I mentioned earlier, the NYT reported that Americans gained on average roughly two pounds a month. In fact, the study that the newspaper cited revealed that adults under shelter-in-place orders gained more than half a pound every 10 days. No matter how you break down the numbers, they don’t look any better.
Perhaps the most alarming statistic is that those who kept their lockdown routines may have gained 20 pounds over the trailing year. But it’s not just about the weight gain. As you can imagine, packing on the pounds can hurt self-esteem, which exacerbates the severe national mental health crisis. This may lead to riskier behaviors, which may then impact society at large.
Also, extreme weight gain triggers other health problems for the individual, straining the broader healthcare system. Therefore, WW stock may rise on the fundamental importance of its underlying business.
Fitness Stocks to Buy: Nautilus (NLS)
One of the riskiest names among fitness stocks, I wouldn’t bet the farm on Nautilus. While the exercise equipment manufacturer offers competing products against Peloton, the latter arguably enjoys the better marketing and branding machinery. Nevertheless, NLS stock is an investment that Covid-19 basically saved from death’s door.
Prior to the crisis, health and fitness experts warned that Americans were not getting enough exercise. For instance, an October 2010 article from Harvard Health Blog noted that we lag on exercise. Nearly a decade later, a 2019 article by Time.com cited the Centers for Disease Control and Prevention, which noted that most Americans still don’t get enough exercise.
As confirmation, NLS stock really didn’t budge between October 2010 and October 2019. Sure, plenty of movements existed during this period. But the net result was practically parity at below $2 a share. I mention this not to trash Nautilus but to warn you that Americans could become complacent again in the post-Covid era.
That said, this pandemic is unprecedented. We may very well see a seismic shift in consumer behavior due to infection fears. If so, home fitness stocks like Nautilus could see upside.
Planet Fitness (PLNT)
Traditionally, physical fitness centers suffered from a Catch-22 problem. To be able to work out in one of these places, you had to be fit, but then you need a fitness center to achieve this level of fitness.
This is where Planet Fitness arrived on the scene. Known for its “Judgement Free Zone,” Planet Fitness is a breath of fresh air as far as fitness stocks are concerned. The business is really about helping everyone achieve their goals, which appeals to the broadest base possible. And that in turn sets up strong profitability potential.
Unfortunately, the Covid-19 crisis delivered a very rude awakening to PLNT stock, which plummeted due to government limitations on non-essential activities as well as consumer fears. If the SARS-CoV-2 virus transmits through aerosols, then a gym filled with sweaty people isn’t exactly kosher.
However, thanks to the vaccine rollout, the CDC stated that many Americans can go outside. Undoubtedly, millions will still be scared. But this is one of the best pieces of news for PLNT and fitness stocks in general.
Fitness Stocks to Buy: Garmin (GRMN)
With Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google closing its deal to buy Fitbit, that eliminates what I believe is the only pure-play fitness tracker investment from the market. If I’m wrong about that, you can blame former InvestorPlace feature writer James Brumley.
I’m just kidding of course. But whatever the case, people who are still interested in the fitness tracker market should consider Garmin. Now that Fitbit is gone, this is about as close of a direct play as you’re going to get among fitness stocks. To be fair, Fitbit shares began disappointing stakeholders in large part due to competition. But Covid-19 may have breathed new life into this segment.
That’s because exercise didn’t become irrelevant during the lockdowns. In fact, with work-from-home initiatives almost encouraging a sedentary lifestyle, it became critical to get your rear end off the chair and outside doing something. And having a tracker helps keep you accountable while pushing you to meet quantifiable goals.
Not surprisingly, GRMN stock has performed very well over the trailing year, moving up 72%. Even as gyms and other fitness centers reopen, Garmin will likely soak up demand from consumers who remain hesitant about person-to-person contact.
Big 5 Sporting Goods (BGFV)
One of the biggest names in fitness stocks is the appropriately named Big 5 Sporting Goods. Many analysts assume that BGFV stock jumped higher because sporting goods retailers offer fitness products that cater to customers looking for a viable alternative now that fitness centers were shut down.
That’s part of it. But the real catalyst is that Big 5 sells firearms. Gun retailers have stopped advertising their Kalashnikov-style rifles to the public and do you know why that is? It’s because they don’t need to. The Kalashnikovs are sold out, as are the AR-15s, the Glocks, the Springfields … whatever. If it goes bang, it’s probably already spoken for.
While this business may be unsavory for some investors, it also offers a two-for-one deal for more tolerant buyers. With Big 5, you’re not only getting exposure to the incredibly viable firearms business, you’re also enjoying positive sentiment for fitness stocks.
As you’ve probably seen, RV sales soared during the pandemic. The takeaway is that people want to vacation, they just want to do it safely. Well, Big 5 specializes in outdoor sporting products, including firearms. While risky, BGFV stock is worth consideration for its double relevance.
Fitness Stocks to Buy: Town Sports International (CLUBQ)
If I may be blunt, with perhaps the exception of Big 5 above, fitness stocks tend to be boring. They also tend to have a fundamental risk factor. As I mentioned with the Harvard and Time reports, Americans find it tough to commit to their fitness routines.
Of course, individuals vary significantly. But on the whole, we typically fall off the fitness bandwagon, only to make another new year’s resolution half-a-decade later. Perhaps the pandemic may change this trajectory permanently or maybe not.
If you believe in the former, you should check out Town Sports International with “dumb” money. With CLUBQ stock priced at 29 cents at time of writing, this has the potential to catch fire on social media. Nevertheless, you want to be supremely careful.
Based off Town Sports 10-Q filing with the Securities and Exchange Commission, the holding company owns 185 fitness clubs as of March 31, 2020. Naturally, revenue took a hit in 2020, losing 16% against 2019 results.
Moving forward, the narrative for CLUBQ stock stems on consumer sentiment toward fitness centers. If pent-up demand moves favorably, you stand to make incredible profits. If not, you can lose out big time. Therefore, invest accordingly.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.