After a year like 2020, many Americans figure that just getting to 2021 was enough. But for many people, the start of a new year still means making resolutions. And while many Americans are still waking up to Groundhog’s Day, there is hope that things will look dramatically different in September than they do right now.
Some of the most popular resolutions include losing weight, exercising more, or taking steps to get our life and/or business more organized. And many pure-play companies lean into these trends and are doing well.
As an alternative to this, you can also invest in companies that are not pure plays but can still benefit from consumers looking to start fresh. Owning these stocks helps you manage your risk. If the trend holds, you can ride the wave. On the other hand, if the wave turns into a ripple, the stocks have other catalysts to get them through.
In this special presentation, we’ll take a look at both of these categories. We’ve got several pure-play companies that let investors buy stocks in companies benefiting from these trends. We’ll also give you a few stocks that fall in the latter category.
These are stocks that you might buy at any time and for many reasons. However, they present excellent buys as the new year begins.
Quick Links
- Peloton
- Lululemon
- Apple
- Dick’s Sporting Goods
- Home Depot
- The Container Store
- Shopify
#1 - Peloton (NASDAQ:PTON)
Peloton (NASDAQ:PTON) began trading publicly in September 2019. At that time, the maker of connected fitness products was best known for a holiday ad that sparked a controversy that seems silly today for many reasons. But there has been perhaps no company that benefited more directly from the Covid-19 pandemic than Peloton.
With fitness centers and gyms closed, consumers were looking for a way to maintain their fitness routines. And Peloton’s line of bikes, treadmills, and ellipticals was able to provide consumers with an entertaining, convenient, effective, and most importantly … an at home experience.
As it turns out, many consumers are enjoying their experience which benefits Peloton since the company generates significant revenue from monthly subscriptions associate with its equipment. In fact, in the most recent quarter that the company reported earnings, it reported 1.33 million total connected fitness subscriptions which was more than double from the same quarter the year prior. That’s the kind of thing that gets investors excited.
Another thing that investors love is market share growth. Peloton is seeking to do this through a planned acquisition of Precor. The company announced in December that is was buying its competitor in a deal valued at $420 million.
About Peloton Interactive
Peloton Interactive, Inc operates interactive fitness platform in North America and internationally. The company offers connected fitness products with touchscreen that streams live and on-demand classes under the Peloton Bike, Peloton Bike+, Peloton Tread, Peloton Tread+, Peloton Guide, and Peloton Row names.
Read More - Current Price
- $9.38
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 16 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $6.97 (25.7% Downside)
#2 - Lululemon (NASDAQ:LULU)
Another pure play for fitness and weight loss resolutions is Lululemon (NASDAQ:LULU). Lululemon shares similar qualities to Peloton. It has a dedicated, passionate consumer base. And with its acquisition of Mirror, the company now has an at-home fitness component to add to its established brand of athleisure – a category the company has essentially invented.
Deutsche Bank analyst Paul Trussell recently reiterated his Buy rating for LULU stock. Trussell also stuck by his $402 price target, which would represent a gain of nearly 10% from the stock’s current level. And right now, Lululemon may be even more attractive because the stock has dipped slightly in the last month. Perhaps investors were expecting lighter holiday sales.
There is some concern that LULU stock is overvalued or “priced for perfection.” Those that argue that point would say that any hiccup in the home fitness trend would be a negative for the company. There are two counter arguments. First, is the consideration that home fitness is not just a bubble. And the second is that athleisure wear is now mainstream.
Investors will get a better feel when the company reports earnings the week of January 11.
About Lululemon Athletica
Lululemon Athletica Inc, together with its subsidiaries, designs, distributes, and retails athletic apparel, footwear, and accessories under the lululemon brand for women and men. It offers pants, shorts, tops, and jackets for healthy lifestyle, such as yoga, running, training, and other activities. It also provides fitness-inspired accessories.
Read More - Current Price
- $379.42
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 18 Buy Ratings, 10 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $377.63 (0.5% Downside)
#3 - Apple (NASDAQ:AAPL)
Moving away from the pure play fitness stocks, I’ll offer up Apple (NASDAQ:AAPL) for your consideration. Yes, the company is still best known for its iconic iPhone. And the recent release of the iPhone 12 should be reason enough to give the stock consideration. However as a play on fitness resolutions, Apple merits consideration.
In the last year, Apple has been seeing growth in its wearables sector. And that sector includes its Apple Watch which has become a category leader over competitors like Fitbit (NYSE:FIT). The attraction of the Apple watch is that the user doesn’t have to be wearing the device to track their workout. Apple also has multiple versions of its Apple Watch that makes it accessible for consumers of different income brackets.
Apple recently split its stock which makes AAPL stock attractively priced. The bottom line is you can buy AAPL stock to support the Apple Watch you receive as a holiday gift and benefit from owning the stock even if your fitness goals fall a little short.
About Apple
Apple Inc designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. The company offers iPhone, a line of smartphones; Mac, a line of personal computers; iPad, a line of multi-purpose tablets; and wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, and HomePod.
Read More - Current Price
- $254.49
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 11 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $236.78 (7.0% Downside)
#4 - Dick’s Sporting Goods (NYSE:DKS)
The last “fitness” stock I’ll ask you to consider is Dick’s Sporting Goods (NYSE:DKS). Dick’s was a pandemic winner for multiple reasons. The company was able to capitalize on the trend towards athleisure wear. The company has a private label brand, CALIA, which is now the company’s second-largest women’s brand in the company.
The company also benefited from the desire of individuals to go outside. Whether that was running shoes or golf clubs, Dick’s was able to provide several different avenues to draw consumers to its store or to its website. And make no mistake about it; being able to build its digital brand is a key to the company’s 2020 success. And it also sets the table for the company going forward.
Dick’s is also a company that is appealing for investors who look to invest according to their values. The company took a controversial stance when it banned gun sales at all of its locations. This did have an effect on its business but that has appeared to subside as Dick’s has substituted firearms for higher margin products that is helping the company become a four-season sporting goods store.
If you’re a fan of momentum investing, DKS stock is up nearly 13% in the last month.
About DICK'S Sporting Goods
DICK'S Sporting Goods, Inc, together with its subsidiaries, operates as an omni-channel sporting goods retailer primarily in the United States. The company provides hardlines, includes sporting goods equipment, fitness equipment, golf equipment, and fishing gear products; apparel; and footwear and accessories.
Read More - Current Price
- $218.76
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $244.95 (12.0% Upside)
#5 - Home Depot (NYSE:HD)
The best reason I can give you to invest in Home Depot (NYSE:HD) is that the company didn’t need the pandemic to have a solid year in 2020. However the pandemic helped. Home Depot leans into the category of resolutions to have a more organized home.
We’ve all been spending a lot of time in our homes. And believe it or not, there may still be a need to cut the clutter. And many homeowners are realizing that they want to make better use of the space they have. After all, an open floor plan is great for entertaining. It’s not as desirable when you’re looking for the privacy of a home office or classroom.
Home Depot became a strong omnichannel story in 2019 and that carried right through in 2020. The company is not immune from competition. Lowe’s (NYSE:LOW) has upped its digital game. However both LOW stock and HD stock have been essentially mirror image performers which suggests there’s plenty of room for both competitors. But the one advantage a company like Home Depot has is that it has many items that consumers can’t get from Amazon (NASDAQ:AMZN).
About Home Depot
The Home Depot, Inc operates as a home improvement retailer in the United States and internationally. It sells various building materials, home improvement products, lawn and garden products, and décor products, as well as facilities maintenance, repair, and operations products. The company also offers installation services for flooring, water heaters, bath, garage doors, cabinets, cabinet makeovers, countertops, sheds, furnaces and central air systems, and windows.
Read More - Current Price
- $392.60
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $426.00 (8.5% Upside)
#6 - The Container Store (NYSE:TCS)
If you’re looking for a stock that looks more like a short-term pure play on home organization, I offer you The Container Store (NYSE:TCS). This is a stock that was a late bloomer in terms of pandemic winners. The show got a fourth quarter boost when Netflix (NASDAQ:NFLX) began streaming episodes of “Get Organized With the Home Edit.” On “Dumb Money Live” in September, co-host Jordan McClain labeled the show “a giant infomercial for The Container Store” and investors have rewarded the stock accordingly.
TCS stock is up 195% in the last four months and 16% in the last month. With many Americans expected to be staying indoors throughout the winter months, it would seem the company will continue to have catalysts for the next couple of quarters.
The Container Store needed the shot in the arm as the company had to shut many of its brick-and-mortar stores due to the pandemic. However in the last quarter, the company did post year-over-year increases in profits and revenue.
About The Container Store Group
The Container Store Group, Inc operates as a specialty retailer of organizing solutions, custom spaces, and in-home organizing services in the United States. The company operates in two segments, The Container Store and Elfa. Its stores provide custom space offerings; countertop, cosmetic and jewelry, shower and bathtub, drawer organizers, and cabinet storage products; closets that includes shoe storage, hangers, drawer organizers, boxes and bins, hanging storage bags, garment racks, jewelry storage, and bedding.
Read More - Current Price
- $2.65
- Consensus Rating
- Hold
- Ratings Breakdown
- 0 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $1.00 (62.3% Downside)
#7 - Shopify (NYSE:SHOP)
Some people make resolutions for themselves or their homes. But what about their businesses? And particularly what if your resolution is to start or grow your business? That’s the case that I’ll make for Shopify (NYSE:SHOP).
Small business owners that are looking to have an online presence are turning to Shopify because it is a “one-stop shop” for building an online store, processing payments, and integrating inventory and shipments.
So not only can Shopify help a business get off the ground, it can help the business stay organized and in control.
SHOP stock is looking a little expensive and analysts have a consensus rating of “Hold” with a consensus price target that suggests the price may have a downside of over 10%.
However, the company is reviewed by over 30 analysts and has a wide range of price targets. And the stock is up about 6% in the last month suggesting that it has some momentum.
About Shopify
Shopify Inc, a commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, Australia, China, and Latin America. The company's platform enables merchants to displays, manages, markets, and sells its products through various sales channels, including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons, and marketplaces; and enables to manage products and inventory, process orders and payments, fulfill and ship orders, new buyers and build customer relationships, source products, leverage analytics and reporting, manage cash, payments and transactions, and access financing.
Read More - Current Price
- $108.95
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 15 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $99.03 (9.1% Downside)
No matter what the year 2020 brought to you, the best thing about a new year is the opportunity to have a fresh start. If you’re an investor, you may be looking at the market and wondering if and when the party is going to end. And the reality is that anybody that tells you that they know is lying.
But one way you can prepare your portfolio for whatever comes next is not to fight the trend. Or, in the case of new year’s resolutions, don’t fight consumer behavior. While this may not be a sure-fire way to select stocks, it is a great way to find stocks that are likely to be seeing their shares increase, if only on a short-term basis.
Investing in momentum stocks is different from buying “widow and orphan” stocks. And some of the stocks in this presentation contain more risks than others.
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