10 Best Fitness and Gym Stocks To Buy Now

Published on April 16, 2023 at 3:59 pm by Hamna Asim in Hedge Funds, News

In this article, we discuss 10 best fitness and gym stocks to buy now. If you want to see more stocks in this selection, check out 5 Best Fitness and Gym Stocks To Buy Now.

From 2022 to 2023, the worldwide online/virtual fitness market experienced a compound annual growth rate (CAGR) of 39.4%, increasing from $15.65 billion to $21.82 billion. The market is projected to continue growing at a CAGR of 36.9% and reach $76.57 billion by 2027. The expanding use of smart devices is predicted to boost the expansion of the online/virtual fitness market. A survey by OMD Worldwide, a media communications agency based in the United States, conducted across Australia, Belgium, China, Greece, Ireland, Italy, KSA, Netherlands, Spain, Sweden, the U.K., and the U.S., reveals that 61% of individuals own a smart device. Therefore, the growing prevalence of smart devices is fueling the expansion of the online-virtual fitness market.

Similarly, the home fitness equipment market is projected to expand from $15.13 billion in 2022 to $16.55 billion in 2023, demonstrating a compound annual growth rate of 9.3%. Furthermore, the market is expected to experience a CAGR of 10.1% and reach $24.28 billion by 2027. The home fitness equipment market includes the sales of various types of fitness equipment, such as cardiovascular training equipment, stationary cycles, dumbbells, kettlebells, store-based equipment, and in-home gym equipment. In 2022, Asia Pacific was the largest region in terms of sales within the home fitness equipment market, while Western Europe ranked as the second largest region.

In the coming year, virtual and augmented reality workouts will continue to be popular as more individuals seek out interactive fitness experiences. These types of workouts, such as Supernatural, Holoball, and Thrill of the Fight, not only provide entertainment and engagement, but also enhance accessibility for individuals with mobility or disability challenges. Additionally, advancements are being made in AR contact lens technology, which could display workout information during exercise routines. Mojo Vision is currently working on developing these lenses and collaborating with companies like Adidas, Trailforks, Wearable X, and 18 Birdies to determine the most effective ways to utilize and interface with this new technology. Although smartwatches and fitness trackers have been in use for some time now, the upcoming wearables that will be released in 2023 are anticipated to be more sophisticated. According to Forbes, the market for internet-of-things (IoT) based health gadgets will grow to $267 billion by 2023.

Some of the best fitness stocks to invest in include NIKE, Inc. (NYSE:NKE), Peloton Interactive, Inc. (NASDAQ:PTON), and Skechers U.S.A., Inc. (NYSE:SKX).

Our Methodology

We scanned Insider Monkey’s database of 943 hedge funds and picked the top 10 companies that provide services in the fitness and gym sector with the highest number of hedge fund investors. These are the best fitness stocks to buy according to hedge funds.

Jacob Lund/Shutterstock.com

Best Fitness and Gym Stocks To Buy Now

10. Sprouts Farmers Market, Inc. (NASDAQ:SFM)

Number of Hedge Fund Holders: 18

Sprouts Farmers Market, Inc. (NASDAQ:SFM) sells fresh, natural, and organic food products within the United States. The company’s offerings include various categories of perishable products such as meat, seafood, fresh produce, deli, bakery, dairy and dairy alternatives, as well as non-perishable products such as vitamins and supplements, grocery items, bulk goods, frozen foods, beer and wine, and natural health and body care products. Sprouts Farmers Market, Inc. (NASDAQ:SFM)’s products are often consumed by fitness oriented people.

On March 2, Sprouts Farmers Market, Inc. (NASDAQ:SFM) reported a Q4 GAAP EPS of $0.42 and a revenue of $1.58 billion, outperforming Wall Street estimates by $0.05 and $20 million, respectively.

JPMorgan analyst Ken Goldman on March 8 raised the firm’s price target on Sprouts Farmers Market, Inc. (NASDAQ:SFM) to $35 from $33 and maintained a Neutral rating on the shares. The company’s stock has increased by 44% since May of last year due to “three surprisingly strong prints” in a row, marking the first time since pre-pandemic. The analyst credited CEO Jack Sinclair for stabilizing Sprouts’ fundamentals.

According to Insider Monkey’s fourth quarter database, 18 hedge funds were bullish on Sprouts Farmers Market, Inc. (NASDAQ:SFM), compared to 19 funds in the earlier quarter. D E Shaw held the largest stake in the company, comprising 720,941 shares worth $23.3 million.

In addition to NIKE, Inc. (NYSE:NKE), Peloton Interactive, Inc. (NASDAQ:PTON), and Skechers U.S.A., Inc. (NYSE:SKX), Sprouts Farmers Market, Inc. (NASDAQ:SFM) is one of the best fitness stocks to invest in.

Here is what Arch Capital specifically said about Sprouts Farmers Market, Inc. (NASDAQ:SFM) in its Q2 2022 investor letter:

“We entered 2022 with Sprouts Farmers Market, Inc. (NASDAQ:SFM) as the fund’s largest position. This was due to our initial position sizing, the stock’s great performance, and the poor performance of the rest of our portfolio holdings. In early March, SFM popped 15% and reached a market cap close to $4 billion. This put a double whammy on our expected forward returns for the stock. First, and most obvious, ahttps://www.insidermonkey.com/institutional-investor/arch-capital-group-ltd/1988825/ higher market cap means we are yielding less in cash flow each year. Our bet on SFM revolved around durable (but low growth) cash flow generation that was yielding more than 10% when we purchased shares. At a market cap significantly higher, forward returns would be lower than our 15% hurdle rate. Second, a big reason we liked SFM was management’s strategy to pour all free cash flow into share repurchases at a depressed earnings multiple. This attractiveness incrementally goes away at higher and higher share prices. Combine this with other opportunities presenting themselves with the broad market sell-off this year, and we decided to fully exit our SFM position.”

9. The Hain Celestial Group, Inc. (NASDAQ:HAIN)

Number of Hedge Fund Holders: 18

The Hain Celestial Group, Inc. (NASDAQ:HAIN) manufactures, markets, and sells organic and natural products in the United States, United Kingdom, and internationally. It is one of the best fitness stocks to monitor. Following The Hain Celestial Group, Inc. (NASDAQ:HAIN)’s fiscal Q2 results, JPMorgan analyst Ken Goldman downgraded the company from Overweight to Neutral, with a price target of $21, a reduction from $22. Although the stock has been strong and increased by 38% since its lowest point on December 20, 2022, the analyst revised EBITDA and earnings estimates for fiscal 2024 and 2025. JPMorgan is taking a less aggressive approach towards sales growth assumptions due to recent volatility and predicts that The Hain Celestial Group, Inc. (NASDAQ:HAIN) will invest a significant portion of its cost savings in marketing and other growth-driving activities.

According to Insider Monkey’s fourth quarter database, 18 hedge funds were bullish on The Hain Celestial Group, Inc. (NASDAQ:HAIN), compared to 22 funds in the prior quarter. David Paradice’s Paradice Investment Management is the largest stakeholder of the company, with 1.45 million shares worth $23.6 million.

Madison Funds made the following comment about The Hain Celestial Group, Inc. (NASDAQ:HAIN) in its Q4 2022 investor letter:

“Stock selection was the poorest for us in this sector. Two stocks in particular – The Hain Celestial Group, Inc. (NASDAQ:HAIN) and Scott’s Miracle-Gro (SMG) – while big winners for us in 2020 and 2021, hurt the portfolio in 2022.

While both companies were so-called COVID beneficiaries (businesses that benefited from consumers staying home and spending on their homes during COVID), we felt they possessed certain additional drivers that would maintain their fundamentals into 2022 and beyond. Hain, for example, has a strong portfolio of organic health and wellness brands that target a higher-end demographic. As strong as their brands are, there is ample room for growth. Put simply, there are channels of distribution like Costco and Walgreens that their brands don’t currently serve, but we believe eventually will. Furthermore, we believed HAIN’s portfolio had pricing power to pull them through this inflationary period.

While we were largely correct on both counts, we underestimated the challenges they faced in their European business (40% of revenue), which overshadowed their success in North America. Entering 2022, HAIN’s stock had just hit a 5-year high of $45. However, the good times were short-lived as Russia invaded Ukraine early in 2022, sending energy prices materially higher in Europe. Although HAIN has a #1 or #2 market share in their brand categories, they could not withstand the economic shock from the war. The pressures on Hain’s European business came from multiple fronts: Rising energy prices skyrocketed their manufacturing and transportation costs. Essential ingredients for their products, like sunflower oil, became scarce as Ukraine is a key exporter of grains. The pressure on energy prices exacerbated an already weakened U.K. consumer due to BREXIT. And finally, the structure of the grocery market in the U.K. led to a delay in price increases. All of these factors weighed heavily on earnings and cash flow. Although we reduced our position size in the early summer, the stock took considerable punishment. As we enter the new year, HAIN’s European business has stabilized considerably. Natural Gas prices have meaningfully corrected, bringing relief not just to their costs but to the U.K. consumer.”

8. Garmin Ltd. (NYSE:GRMN)

Number of Hedge Fund Holders: 23

Garmin Ltd. (NYSE:GRMN) creates, designs, produces, promotes, and delivers an array of wireless equipment across various regions including the Americas, Asia Pacific, Australia, Europe, the Middle East, and Africa. The company’s Fitness division specializes in producing running and multi-sport watches, cycling products, smartwatches, activity tracking devices, along with accessories for fitness and cycling purposes.

As per a research note to investors by Barclays analyst George Wang, the firm increased Garmin Ltd. (NYSE:GRMN)’s price target from $97 to $101 while maintaining an Equal Weight rating on the shares. The analyst reported that the company’s Q4 revenue and earnings exceeded expectations due to strong performances in its Aviation and Auto segments. However, Garmin Ltd. (NYSE:GRMN)’s guidance for fiscal year 2023 fell short of estimates for both revenue and earnings, as it continues to face macroeconomic pressures.

According to Insider Monkey’s fourth quarter database, 23 hedge funds were long Garmin Ltd. (NYSE:GRMN), compared to 26 funds in the preceding quarter. Select Equity Group is the largest stakeholder of the company.

7. Foot Locker, Inc. (NYSE:FL)

Number of Hedge Fund Holders: 25

Foot Locker, Inc. (NYSE:FL) is a footwear and apparel retailer with operations in North America, Europe, Australia, New Zealand, Asia, and the Middle East. The company has a portfolio of brands that includes Foot Locker, Kids Foot Locker, and Champs Sports, as well as the WSS and atmos brands. Foot Locker, Inc. (NYSE:FL) sells sneakers and apparel aimed at youth culture, while Kids Foot Locker caters to children, and Champs Sports operates as a specialty retailer for athletic footwear and apparel in shopping malls. It is one of the best fitness stocks to invest in. On March 20, Foot Locker, Inc. (NYSE:FL) reported a Q4 non-GAAP EPS of $0.97 and a revenue of $2.33 billion, outperforming Wall Street estimates by $0.47 and $190 million, respectively.

On April 4, Argus maintained a Hold rating on Foot Locker, Inc. (NYSE:FL). The firm acknowledged that Foot Locker has renewed its partnership with Nike after the latter declared last year that it would restrict the supply of its products at Foot Locker stores. Despite this development, Foot Locker, Inc. (NYSE:FL) is still encountering difficulties in rejuvenating its business. Argus predicts that Foot Locker’s earnings will continue to be strained in the immediate future, and as a result, they have lowered their FY24 projection from $4.16 to $3.56.

According to Insider Monkey’s fourth quarter database, Foot Locker, Inc. (NYSE:FL) was part of 25 hedge fund portfolios, compared to 24 funds in the prior quarter. Daniel Kretinsky’s Vesa Equity Investment is the largest stakeholder of the company.

Here is what Miller Value Partners Deep Value Strategy has to say about Foot Locker, Inc. (NYSE:FL) in its Q1 2022 investor letter:

“Finally, Foot Locker (NYSE:FL) came under significant pressure during the quarter, with the stock down more than 50% from its highs and valuation not far from early 2020 lows. Nike continues to place a greater focus on their Direct-to-Consumer business, which will decrease their contribution to Foot Locker’s total sales, retreating to historical averages of 50% by 2023. While a near-term headwind to sales, management plans to offset the lost business by expanding distribution to other leading brands, rolling out larger neighborhood free-standing stores, and expanding two new growth banners (WSS & Atmos). WSS stores will provide an off-mall presence and focus on the rapidly growing and underserved Hispanic market. Atmos will provide Foot Locker with the ability to expand into the Japan and Asia sneaker market with their digitally led business model. These new growth concepts have a combined potential to add more than $1B in sales by 2024. The company’s balance sheet remains very strong with $800M in cash and management is increasing returns to shareholders through raising the dividend by 40% and announcing a $1.2B share buyback (more than 40% of the float at current share prices). With the next 12 to 18 months as a transition period for the company, the share price weakness provides attractive reward/risk investment potential, near 3x Enterprise Value/Earnings Before Income, Taxes, Depreciation, and Amortization (EV/EBITDA) and close to a 30% normalized free cash flow yield.”

6. Planet Fitness, Inc. (NYSE:PLNT)

Number of Hedge Fund Holders: 32

Planet Fitness, Inc. (NYSE:PLNT) franchises and manages fitness centers under its eponymous brand. The company has three divisions – Franchise, Corporate-Owned Stores, and Equipment. The Franchise division franchises its business in the United States, Puerto Rico, Canada, Panama, Mexico, and Australia. The Corporate-Owned Stores division operates corporate-owned stores in the United States and Canada. The Equipment division sells fitness equipment to franchisee-owned stores in the United States and Canada.

On March 16, ABC Fitness Solutions declared that it has entered into a fresh four-year deal with Planet Fitness, Inc. (NYSE:PLNT), which is one of the rapidly expanding franchisors and operators of fitness centers, with a higher number of members than any other fitness brand. As per this agreement, Planet Fitness, Inc. (NYSE:PLNT) will shift to ABC’s IGNITE club management solution in all its US and Canada club sites to simplify its club technology operations. This announcement will prolong the partnership until 2027.

According to Insider Monkey’s fourth quarter database, 32 hedge funds were long Planet Fitness, Inc. (NYSE:PLNT), compared to 39 funds in the prior quarter. Karthik Sarma’s SRS Investment Management is the largest stakeholder of the company.

Like NIKE, Inc. (NYSE:NKE), Peloton Interactive, Inc. (NASDAQ:PTON), and Skechers U.S.A., Inc. (NYSE:SKX), Planet Fitness, Inc. (NYSE:PLNT) is one of the premier fitness stocks to watch.

Baron Small Cap Fund made the following comment about Planet Fitness, Inc. (NYSE:PLNT) in its Q4 2022 investor letter:

“Shares of Planet Fitness, Inc. (NYSE:PLNT), the leading franchiser and operator of low-cost fitness centers, rose after reporting strong results. The company reported system-wide same-store sales increased 8.2%, raised estimates for growth in net income, and authorized another large share repurchase. Membership grew to an all-time record, now fully recovered from the pandemic lows. New gym openings are somewhat constrained by availability of HVAC units, but we envision the pace of growth will accelerate and that the base of gyms can still double over time from 2,000 to 4,000. We believe that EBITDA can grow at a mid-teens rate long term on a declining share count and that the trading multiple can modestly expand, which will drive continued good stock performance.”

Click to continue reading and see 5 Best Fitness and Gym Stocks To Buy Now.

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