Staying Fit in a Volatile Market

With the recent surge of fitness related stocks, including the extremely successful IPOs of both Fitbit (FIT), which manufactures activity trackers, and Planet Fitness (PLNT), which specializes in providing a low-cost alternative to traditional high-end fitness options, many are considering what is responsible for the success of fitness related companies. During a summer when many other IPOs like Houlihan Lokey (HLI), an investment Bank, and Sunrun (RUN), a solar panel company, both underperformed expectations, many insiders have been surprised by the success of the Fitness related IPOs.

On a broader level, while the market has been very volatile as of late, due to the unrest in China, the impending Fed hike, and the situation in Greece, fitness stocks have managed to remain somewhat unscathed. Both Fitbit and Planet Fitness are currently up over 25% since their IPOs, and the share price of Towne Sports International Holdings (CLUB), the owner and operator of the New York Sports Club franchise, has increased over 40% in the last month, while the Dow Jones Industrial Average has been fairly volatile. Some have attributed the apparent success of these companies to their high user base and steady cash flows, which intrigue investors in times of uncertainty. Other, more cynical observers, feel that this trend is nothing more than a “Fitness Fad” that will not last. Regardless of where one stands on the long-term prospects of these companies, though, one cannot deny the impressive returns of these companies as of late. The much-anticipated IPO of Soul Cycle in the months to come will certainly have a drastic impact on where people stand on the long-term prospects of Fitness related companies. As we look forward to see what will come of this interesting trend, focusing on the broader, ancillary businesses affiliated with fitness, ie. Health related companies, may prove quite interesting. With the health-focused population in America surging to unprecedented levels, and the brand-recognition of health clubs soaring, I feel that the profitability of companies chasing the lower-end of the market, like Planet Fitness, and the higher end of the market, like Soul Cycle, will only continue to increase as these companies mature.

-Andrew Lifshitz