In this article, we will take a look at the 10 best sporting goods stocks to buy. You can skip our comprehensive analysis of the sporting goods industry and go directly to the 5 Best Sporting Goods Stocks to Buy.
The sporting goods industry contracted in size during 2020 as the pandemic hit sports events around the world and led to a dramatic decrease in demand. This was the first time in more a decade that the market capitalizations of big sports firms fell during a fiscal year. However, sports firms still outperformed the wider market during this time period. The sports market, dominated by US-based businesses, has shown early signs of a recovery this year and is expected to grow to $82 billion by 2023 at a compound annual growth rate of close to 4%.
According to research by management consultancy McKinsey, one of the reasons why the sports firms fared better than traditional businesses during the crisis was that the sportswear sector performed better than other apparels during the pandemic. For example, NIKE, Inc. (NYSE: NKE), one of the largest sportswear firms in the world, reported an 82% increase in digital sales at the height of the pandemic between June-August 2020. NIKE, Inc. (NYSE: NKE) said the sales offset falling revenues because of cancelled sporting events and shuttered stores.
DICK’S Sporting Goods, Inc. (NYSE: DKS), a New York-based sports retail company, blew past Wall Street expectations on revenue and earnings in the summer of 2020 as it reported that online sales had increased by close to 200% in the second quarter of the year. This figure also included curbside sales made by the retail chain. Ed Stack, the CEO of DICK’S Sporting Goods, Inc. (NYSE: DKS), said at the time that he expected curbside business to grow even further beyond the pandemic.
Even though the sports market saw big losses almost everywhere in the world, the one peculiarity was China where the industry continued to register double digits growth. As a result, the firms associated with Chinese manufacturers fared better than others. Callaway Golf Company (NYSE: ELY), which sources several products from the Asian powerhouse, reported record net sales during the last few months of 2020. Callaway Golf Company (NYSE: ELY) also said in the winter of 2020 it was recovering from the impact of COVID-19 better than expected.
Under Armour, Inc. (NYSE: UAA), a Washington-based manufacturer of sportswear, has used the COVID-19 pandemic to reinvent itself. The company has posted strong quarterly results over the past nine months by cashing in on trends like the surge in demand for athletic wear, the dramatic pivot toward e-commerce which has favored brands that market sportswear, and the decimation of the sports goods industry that left competitors reeling. Under Armour, Inc. (NYSE: UAA) is also building brand awareness through use of platforms such as YouTube.
Another interesting trend in the market during the pandemic was the increase in sales of certain sporting goods like bicycles, a shift towards individual sports over team ones induced by pandemic-related fears among the general populace. Hibbett Sports, Inc. (NASDAQ: HIBB), a sports retailer, reported earlier this year that inventories were down close to 30% last year due to supply chain disruptions and the strong demand for sports-related equipment. Hibbett Sports, Inc. (NASDAQ: HIBB) is one of the leading sellers of bicycles in the United States.
The return of large sporting events and the vaccine rollout have enabled a return to normality that is set to benefit the sporting goods industry in the next few months. McKinsey has highlighted that trends such as rising outdoor individual sports, home exercise, yoga, e-sports, and virtual races will remain popular in 2021 and the rate of COVID-19 recovery for most sports firms will be tied to capitalizing on these trends. The McKinsey research underlines the importance of aligning with the constantly evolving industry dynamics.
This is a wider business lesson that can also be applied to other sectors of the economy that have witnessed a slump in recent times, like the hedge funds in the finance world. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Photo by Thomas Serer on Unsplash
With this context in mind, here is our list of 10 best sporting goods stocks to buy.
Best Sporting Goods Stocks to Buy
10. Vista Outdoor Inc. (NYSE: VSTO)
Number of Hedge Fund Holders: 23
Vista Outdoor Inc. (NYSE: VSTO) is a Minnesota-based company that makes and sells sports goods and recreational products. It was founded in 2014 and is placed tenth on our list of 10 best sporting goods stocks to buy. Some of the products the firm markets include ammunition products for shooting games, helmets, goggles, and accessories for cycling, snow sports, action sports, and powersports. The company has agreements with more than 40 brands and labels for business in sports-related and recreational goods.
Vista Outdoor Inc. (NYSE: VSTO) shares rallied more than 4% on May 3 on the back of increased demand for ammunition products in the month of April. Despite the pandemic-related supply chain issues plaguing other firms, Vista has managed to meet the increase in demand for consumer products after the lockdown.
At the end of the fourth quarter of 2020, 23 hedge funds in the database of Insider Monkey held stakes worth $312 million in the firm, down from 28 the preceding quarter worth $257 million.
9. Johnson Outdoors Inc. (NASDAQ: JOUT)
Number of Hedge Fund Holders: 12
Johnson Outdoors Inc. (NASDAQ: JOUT) is a Wisconsin-based firm that manufactures and markets sports goods. The company was founded in 1970 and is placed ninth on our list of 10 best sporting goods stocks to buy. It has operations in more than 24 locations globally. The firm is famous for making equipment related to water-related activities such as fishing, diving and watercraft. Some of the brands it owns include the Minn Kota, Humminbird, Cannon, Eureka, and Jetboil, among others.
Johnson Outdoors Inc. (NASDAQ: JOUT) shares have jumped more than 29% since the beginning of the year as the vaccine rollout allows for outdoor gatherings and leads to an increase in demand for sports goods. The company has seen share price jump almost 600% over the past five years as it continues headway into the recreation sector.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Royce & Associates is a leading shareholder in the firm with 532,834 shares worth more than $60 million.
8. MarineMax, Inc. (NYSE: HZO)
Number of Hedge Fund Holders: 18
MarineMax, Inc. (NYSE: HZO) is a Florida-based firm that makes and sells boats and yachts. It was founded in 1998 and is placed eighth on our list of 10 best sporting goods stocks to buy. The firm sells many different types of boats, including sport cruisers, sport yachts, fishing boats, ski boats, and jet boats, among others. It also deals in boat and yacht accessories, electronic equipment, and water sport accessories. The firm has more than 70 retail locations across the United States where it sells these items. It offers insurance services as well.
On May 3, MarineMax, Inc. (NYSE: HZO) announced that it had acquired KCS International, an American yacht manufacturer, for $63 million. KCS recently purchased a boat manufacturing facility and MarineMax aims to market the boats made at the facility to meet increased global demand for what the company calls premium American products.
At the end of the fourth quarter of 2020, 18 hedge funds in the database of Insider Monkey held stakes worth $48 million in the firm, down from 21 in the preceding quarter worth $52 million.
7. Acushnet Holdings Corp. (NYSE: GOLF)
Number of Hedge Fund Holders: 13
Acushnet Holdings Corp. (NYSE: GOLF) is a Fairhaven-based company that markets golfing products. It was founded in 1910. It has operations in the United States, Europe, the Middle East, Africa, Japan, Korea, and other countries. The products that the firm sells include golf balls like Pro V1, Pro V1x, AVX, Tour Soft, Velocity, and Pinnacle, as well as golf clubs like the Titleist, Vokey Design and Scotty Cameron. Like Under Armour, Inc. (NYSE: UAA) and NIKE, Inc. (NYSE: NKE), GOLF is a notable sports stock to buy now.
Investment advisory Truist Securities on March 23 called Acushnet Holdings Corp. (NYSE: GOLF) stock ‘a pure play’ in the market as strong equipment sales in the first quarter of 2021 drive growth for the gold industry in the post pandemic economy.
Out of the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in the firm with 180,263 shares worth more than $7 million.
6. Clarus Corporation (NASDAQ: CLAR)
Number of Hedge Fund Holders: 17
Clarus Corporation (NASDAQ: CLAR) is a Utah-based firm that makes outdoor equipment and lifestyle products. It is placed sixth on our list of 10 best sporting goods stocks to buy and was founded in 1991. The company makes and sells clothing items like shells, insulation, midlayers, pants, rock-climbing footwear, as well as equipment such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gears. The firm manufactures and sells climbing gear under the Black Diamond Equipment, PIEPS, and SKINourishmen brands.
On April 30, Clarus Corporation (NASDAQ: CLAR) declared a quarterly dividend of $0.025 per share, in line with market estimates. Earlier this year, the company reported a revenue of $224 million for 2020, compared to $229.4 million in 2019.
At the end of the fourth quarter of 2020, 17 hedge funds in the database of Insider Monkey held stakes worth $69 million in the firm, up from 15 in the previous quarter worth $59 million.
Maran Capital Management, in their Q1 2021 investor letter, mentioned Clarus Corporation (NASDAQ: CLAR). Here is what Maran Capital Management has to say about Clarus Corporation in their letter:
“Clarus (CLAR) – As with AOUT, channel checks reveal continued strength across all of Clarus’ segments. Sell side estimates appear too low.”
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Disclosure: None. 10 Best Sporting Goods Stocks to Buy is originally published on Insider Monkey.
