Work Your Portfolio into Shape With a 25% Gain: Life Time Fitness, Inc. (LTM), Foot Locker, Inc.(FL), Dicks Sporting Goods Inc (DKS)

Dicks Sporting Goods Inc (NYSE:DKS) has received praise from Barron’s and the Wall Street community in recent weeks, both attesting that the company offers growth at a reasonable price. Earnings at Dicks Sporting Goods Inc (NYSE:DKS)’s have grown 12% in the last year, while revenue has grown a respectable 10%. In addition to consistent footwear and apparel sales, Dicks Sporting Goods Inc (NYSE:DKS)’s has a growing golf category.

Foot Locker, Inc. (NYSE:FL) is a favorite of value investor Karen Finerman, and Wall Street believes the company is taking market share from competitor Finish Line Inc (NASDAQ:FINL). Revenue at Foot Locker, Inc. (NYSE:FL) has grown 8% in the last year while earnings have grown 50% from a weak base. The company reports earnings on Mar. 8 and I advocate buying the stock before the announcement. Foot Locker, Inc. (NYSE:FL) also increased its quarterly dividend to $0.20 a share, a sign of underlying business strength.

How do these retailers come into play with a gym membership? Life Time Fitness’ high-end sports club membership is arguably a discretionary purchase, and in my opinion the purchase of new sporting equipment (DKS) and tennis shoes (FL) go hand-in-hand.

Aside from Life Time Fitness, Inc. (NYSE:LTM), Town Sports International Holdings, Inc. (NASDAQ:CLUB) is the only other publicly-traded fitness club to my knowledge. However, I do not feel a comparison is appropriate as the two companies serve different demographics. The $220 million Town Sports is significantly smaller and concentrated in only four metropolitan areas.

Foolish Bottom Line

For track and field athletes, which hurdle is easier to clear, the “high hurdle” of 42 inches or the “high school high” of 39 inches? Aphorisms aside, Life Time Fitness management lowered the bar on their 2013 guidance, and the market reacted negatively with the largest single-day sell-off since LTM’s initial public offering in 2004.

While there are multiple reasons for insiders to sell, only one reason exists for insider buying. Jack Eugster bought 3,000 shares of stock at $41.95 per share, putting $125,850 of his own money on the line. The timing of the trade is also important, as Eugster bought on the first day he was permitted to do so following the company’s negative pre-announcement.

A near-term catalyst for Life Time Fitness is on Wednesday, March 13 when management presents at the UBS Global Consumer Conference in Boston. Readers will learn if the recent sell-off is warranted when the company reports first quarter 2013 earnings on Thursday, April 25.

My suggestion: Place a bet with the smart money, and I believe you will be rewarded in both the short and long-term.

The article Work Your Portfolio into Shape With a 25% Gain originally appeared on Fool.com and is written by John Macris.

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