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.”
4. Lululemon Athletica Inc. (NASDAQ:LULU)
Number of Hedge Fund Holders: 46
In the second quarter of 2021, the company grew its revenue by 61% year over year to $1.5 billion while the gross margin increased 390 basis points to 58.1%.
Even in the midst of a pandemic, the athleisure company is one of the fastest-growing in the fitness market. Lululemon Athletica Inc. (NASDAQ:LULU) opened 11 new company-operated stores in the second quarter, bringing the total number of stores worldwide to 534.
Lululemon Athletica Inc. (NASDAQ:LULU) is also expanding its business by acquiring Mirror, a fitness on-demand platform based in New York.
The winning Vancouver-based apparel stock gained more attention from the elite hedge funds in the second quarter. Of the 873 elite funds tracked by Insider Monkey, 46 were long Lululemon Athletica Inc. (NASDAQ:LULU) at the end of June, up from 41 in the first quarter of 2021. Boston-based investment firm Arrowstreet Capital is the leading stakeholder of the company, owning 410,700 shares worth $149 million.
Oppenheimer analyst Brian Nagel maintained an Outperform rating on Lululemon Athletica Inc. on September 17. (NASDAQ:LULU).
3. Peloton Interactive, Inc. (NASDAQ:PTON)
Number of Hedge Fund Holders: 67
Leading interactive fitness company Peloton Interactive, Inc. (NASDAQ:PTON) ranks third on the list of 10 best fitness stocks to invest in. The New York-based cardio equipment manufacturer does not only get its revenue from selling stationary bikes, treadmills, and fitness apparel. In fact, the majority of Peloton Interactive’s (NASDAQ:PTON) revenue comes from its subscription-based interactive tool required to fully operate its connected fitness equipment.
In fiscal 2021, Peloton Interactive, Inc. (NASDAQ:PTON) had a total of 2.33 million subscriptions, up from 1.09 million in the previous year. The interactive fitness company’s revenue in fiscal 2021 grew by more than 120% to $4.02 billion. On October 11, Edward Yruma of Keybanc kept an Overweight rating on Peloton Interactive, Inc. (NASDAQ:PTON) with a price target of $155.
At the end of the June quarter, 67 hedge funds in the database of Insider Monkey held stakes worth $6.12 billion in Peloton Interactive, Inc. (NASDAQ:PTON), up from 64 in the first quarter worth $3.96 billion.
2. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 67
NIKE, Inc. (NYSE:NKE) stock rose 27% last year after the company shifted its focus to online sales during the pandemic. In the recent earnings announced in September, the company’s digital sales grew 29% to $4.7 billion. The company’s overall revenue in the first quarter of fiscal 2022 was up 16% year over year to $12.2 billion.
NIKE, Inc. (NYSE:NKE) also serves as a good passive income tool for investors as the company pays its shareholders an annual dividend of $1.10 per share. The company has increased its dividends in the last 11 years. NIKE, Inc. (NYSE:NKE) ranks second on our list of 10 best fitness stocks to invest in.
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 138
Mega-cap tech giant Apple Inc. (NASDAQ:AAPL) tops our list of the 10 best fitness stocks to invest in. According to data gathered by Counterpoint Research, the $2 trillion-dollar company has a decent share of the fitness tracker market, surpassing the 100-million mark for the Apple Watch user base in the June quarter. In its third-quarter report, Apple Inc. (NASDAQ:AAPL) shared its revenue from the wearables, home, and accessories segment which totaled $8.8 billion, up from $6.5 billion in Q3 2020.
In addition, Apple Inc. (NASDAQ:AAPL) debuted Apple Fitness+, a connected fitness program that brings studio-style workouts to the iPhone, iPad, and Apple TV in December 2020. The stock gained 28% in the past twelve months.
On October 27, Morgan Stanley kept an Overweight rating on Apple Inc. (NASDAQ:AAPL) with a price target of $166 per share.
You can also take a peek at the 10 High Beta Dividend Stocks to Buy and 10 Stocks To Invest In According To Game Creek Capital.
