Marshall Hargrave: Thematic investing is a tried and true way of capitalizing on broad, fast moving trends. The latest trend is in healthy and active living. There are multiple ways to play this the health/fitness market, with the best being the top 5 fitness stocks to buff up your portfolio.
The rapid rise of obesity over the past few years have helped shed light on the need for more active lifestyles. The need to get in better shape has quickly grown into an obsession. Much like the boom we’re seeing in the mobile app market, healthy living is now all the rage and growing into quite a remarkable trend of its own.
Activewear, fitness centers and supplements are a few of the best ways to play this market. More specifically, there are 5 fitness stocks to buff up your portfolio, just in time for beach season.
1. Lululemon (NASDAQ: LULU)
This leading yoga pants maker is down nearly 50% from its 52-week high. It’s yet to recover from the yoga pants debacle back in 2013. There’s also speculation that Lululemon could be an enticing buyout candidate. Its enterprise value is now below $5 billion, which would make it relatively easy for one of the major apparel companies to snatch up Lululemon. It trades at an 8.7 enterprise value-to-earnings before interest taxes depreciation and amortization multiple, which is the lowest EV/EBITDA multiple the stock has traded at in over five years.
With no debt and a high-margin product, Lululemon has one of the best returns on investment in the apparel business, coming in at 25%. It has net cash of $5 a share, which covers around 13% of market cap. The key growth opportunity includes expanding overseas. It believes it can have 20 stores opened in Europe and Asia by 2017. Over 90% of its revenues are currently tied to the U.S.
2. Buy GNC (NYSE: GNC)
Back in February, shares of this leading vitamin/supplement retailer tumbled over 15% in a single day and have been in steady decline since then. Shares are now down over 40% from their 52-week high at the end of last year. GNC has over 8,500 retail stores. Top peer, Vitamin Shoppe, only has around 700 stores.
GNC has a notable tailwind beyond just an increase in health awareness. The aging population should help boost demand for supplements. There’s also plenty of room to grow internationally with the help of franchising. It also has partnerships with PetSmart (GNC Pets branded products), Rite-Aid (GNC Livewell store-in-a-stores) and Sam’s Club (where it sales its private label products).
GNC trades at a 12.4 P/E, which is the lowest since its IPO. Its PEG is just under 1.0 and it offers a solid 1.8% dividend yield.