We recently published a list of Top 10 Stocks to Buy According to SRS Investment Management. In this article, we are going to take a look at where Planet Fitness, Inc. (NYSE:PLNT) stands against other top stocks to buy according to SRS Investment Management.
SRS Investment Management is a New York-based investment firm founded in 2006 by Karthik Sarma. The firm focuses on diverse investments across industries, including technology, media, telecommunications, consumer goods, and industrial sectors. It employs a research-driven approach to identify promising opportunities in global markets, leveraging its expertise to navigate complex financial landscapes.
As an investment advisory firm, SRS provides detailed insights into its business practices through its regulatory disclosures, although these are not verified by the SEC or state securities authorities. The firm emphasizes thorough due diligence when evaluating potential investments, gathering information on a company’s products, services, and market position. Its analytical approach includes engaging with industry experts, assessing supply and demand dynamics, and constructing financial models to project future performance and returns.
SRS primarily follows a global long/short equity strategy, aiming for high risk-adjusted returns while prioritizing capital preservation. The firm diversifies its investments across multiple industries and regions to mitigate risks. Its investment process involves extensive fundamental research, disciplined portfolio management, and strategic positioning in both long and short positions. This approach enables SRS to capitalize on market inefficiencies and generate sustainable returns.
Additionally, the firm runs a Focused Investment Program, targeting undervalued securities and acquiring significant positions at favorable prices. This strategy relies on active shareholder engagement, where SRS seeks positive responses from company management and stakeholders to influence corporate actions. The effectiveness of this strategy depends on how the market reacts to these initiatives and the willingness of companies to adopt changes proposed by shareholders. Through its meticulous investment approach, SRS aims to drive long-term value creation for its investors.
Karthik Sarma is an Indian billionaire hedge fund manager and the founder of SRS Investment Management, which he launched in 2006 after five years at Tiger Global Management. With a strong background in finance and investment, Sarma has also served as a director on Avis’s board since 2020, playing a key role in its strategic decisions. His educational background includes a bachelor’s degree from the Indian Institute of Technology Madras and a master’s degree from Princeton University. His professional journey began with three years at McKinsey & Co. as a consultant, where he gained experience in business strategy and financial analysis. He later joined Tiger Global Management, where he worked as a Managing Director from 2001 to 2005, honing his expertise in hedge fund management before establishing SRS Investment Management. Sarma’s ability to identify and capitalize on investment opportunities has positioned him as a highly influential figure in the hedge fund industry.
As an immigrant who moved to the United States for graduate studies, Sarma has built a reputation as a strategic investor with a disciplined approach to fund management. His experience across consulting, investment management, and corporate governance has contributed to his firm’s success. Through SRS, he continues to influence the financial landscape, focusing on long-term value creation for investors while maintaining a strong presence in key industries.
As of its latest filing for the fourth quarter of 2024, SRS Investment Management reported overseeing approximately $7 billion in 13F securities. The firm’s investment approach remains highly concentrated, with its top ten holdings accounting for 92.05% of total assets. This level of concentration suggests a high-conviction strategy, where SRS invests heavily in a select group of companies it believes offer strong long-term growth potential.
Our Methodology
The stocks discussed below were picked from SRS Investment Management’s Q4 2024 13F filings. They are compiled in the ascending order of the hedge fund’s stake in them as of December 31, 2024. To assist readers with more context, we have included the hedge fund sentiment regarding each stock using data from 1,009 hedge funds tracked by Insider Monkey in the fourth quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A smiling person in sports gear testing out a piece of new fitness equipment.
Planet Fitness, Inc. (NYSE:PLNT)
Number of Hedge Fund Holders as of Q4: 41
SRS Investment Management’s Equity Stake: $464.90 Million
Planet Fitness, Inc. (NYSE:PLNT), one of the largest fitness club franchises, reported strong financial results for the fourth quarter of 2024. Total revenue increased by 19.4% year-over-year to $340.5 million, driven by a 5.5% rise in system-wide same-club sales. System-wide sales grew to $1.2 billion from $1.1 billion in the previous year. Net income attributable to Planet Fitness rose to $47.1 million, or $0.56 per diluted share, compared to $35.3 million, or $0.41 per diluted share, in the corresponding quarter of the previous year. Adjusted net income also saw an increase to $59.7 million, or $0.70 per diluted share, while adjusted EBITDA climbed to $130.8 million. The company expanded its footprint with 86 new club openings, bringing the total to 2,722 locations by year-end.
As of December 31, 2024, Planet Fitness, Inc. (NYSE:PLNT) maintained a strong financial position with cash and marketable securities totaling $529.5 million, including cash and equivalents of $293.2 million. The company’s continued expansion efforts were evident, with franchisee-owned clubs accounting for the majority of new openings.
For the fiscal year 2025, Planet Fitness, Inc. (NYSE:PLNT) projects revenue growth of around 10%, supported by system-wide same-club sales growth in the 5% to 6% range. Adjusted EBITDA is also expected to rise by approximately 10%, while adjusted net income is forecasted to increase by 8% to 9%. Additionally, adjusted net income per share is anticipated to grow by 11% to 12%, factoring in expected share repurchases. With a solid financial outlook and a commitment to expansion, Planet Fitness remains well-positioned for continued success in the fitness industry.
As of Q4 2024, SRS Investment Management held more than 4.7 million shares in Planet Fitness, Inc. (NYSE:PLNT), valued at over $464 million. Insider Monkey’s database indicated that 41 hedge funds out of the 1,009 hedge funds held stakes in the company at the end of Q4 2024, with a value of nearly $1.79 billion, as opposed to 34 funds in Q3.
Vulcan Value Partners stated the following regarding Planet Fitness, Inc. (NYSE:PLNT) in its Q2 2024 investor letter:
“Planet Fitness, Inc. (NYSE:PLNT) pioneered the “high value, low price” (HVLP) gym model and operates over 2,500 gyms globally with 18.7 million members. Their straightforward, no-frills approach offers excellent value, appealing to a diverse and casual fitness demographic. Members enjoy a clean environment, regularly updated equipment, and accessible pricing starting at $10 per month, with their premium “Black Card” membership providing extensive benefits and access to all locations. Planet Fitness captured roughly 90% of U.S. gym membership growth from 2011-2019. The company’s dominant scale coupled with high advertising spend drives powerful growth, and the company plans to double its number of U.S. locations. Planet Fitness demonstrates robust same-store sales growth, high EBIT margins, strong returns on capital, and excellent free cash flow conversion.”
Overall, PLNT ranks 5th on our list of top stocks to buy according to SRS Investment Management. While we acknowledge the potential for PLNT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PLNT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.