In this article, we discuss the 5 best fitness stocks to invest in. If you want to read our detailed analysis of these stocks, go directly to the 10 Best Fitness Stocks To Invest In.
5. Herbalife Nutrition Ltd. (NYSE:HLF)
Number of Hedge Fund Holders: 40
Herbalife Nutrition Ltd. (NYSE:HLF) saw a 15% increase in year-over-year revenue in the second quarter of 2021, recording $1.6 billion net sales and beating revenue estimates by $5.3 million. The California-based nutrition retailer’s energy, sports, and fitness category grew 45% year over year.
On September 24, Ivan Feinseth of Tigress Financial said that Herbalife Nutrition Ltd. (NYSE:HLF) is well-positioned to capitalize on global fitness and nutrition trends. Feinseth reiterated a Buy rating on Herbalife Nutrition Ltd. (NYSE:HLF) with a price target of $65.
At the end of the June quarter, 40 hedge funds in the database of Insider Monkey held stakes worth $2.1 billion in Herbalife Nutrition Ltd. (NYSE:HLF), same in the preceding quarter worth $1.9 billion.
In the Q2 2021 Investor Letter of Appleseed Fund, the fund highlighted a few stocks and Herbalife Nutrition Ltd. (NYSE:HLF) is one of them. Here’s what the fund said:
“For long-term investors in Appleseed Fund, Herbalife should be a familiar name, as this will now be the third time that we have purchased Herbalife shares. We only hope that the third time will be as profitable for Appleseed Fund shareholders as the first two times. For those unfamiliar with the company, Herbalife is a global marketer of nutritional products to consumers worldwide. With just 20% of revenues attributable to the United States, the company markets its products through a multi-level distributor network. The business is currently growing at a double-digit annual rate and is generating gross margins of more than 75%, making Herbalife a quickly growing and we believe an attractive business. Herbalife’s business is “capital-light,” which means that the company does not require much in the way of capital investment to grow, allowing Herbalife to generate free cash flow that can mostly be returned to shareholders. Since 2013, Herbalife has used its free cash flow to buy back its stock, resulting in a share count that has declined by more than a third since 2013. Herbalife has a clean bill of health from a regulatory standpoint; its compliance function is the gold standard within the multi-level marketing industry.
At our purchase price, Herbalife shares were trading at the same share price as 2018. The company is firing on almost all cylinders right now, but its shares are undervalued for two reasons. First, the company’s China business has been struggling. We are not so worried about Herbalife’s China business because China represents only 5.5% of company revenues. Moreover, we believe the setbacks are temporary, and management has put a plan in place to reinvigorate revenue growth in China. Second, investors are worried that the company’s growth rate will be harmed as the economy opens up again. We conservatively assume that the company’s long-term growth rate will be 5% per annum, which is quite a bit lower than the 19% growth rate that Herbalife posted in Q1 2021. However, even assuming a 5% growth rate, Herbalife shares are significantly undervalued. Herbalife was trading at less than 10x earnings per share when we bought the stock, which represented an outstanding bargain, in our view.”
