The Smart Fitness Industry is a Huge Potential Investing Opportunity

As I looked out my bedroom window at the hazy, smoke-filled city skyline, I realised I had a strange decision to make.

Would it actually be healthier not to cycle to work this morning? I asked myself.

What to do…?

I was two weeks into my vague New Year’s resolution to ‘get fitter’ (I avoid easily broken specifics these days).

My plan was to cycle to work two or three times a week (again, good to keep it vague, lest I fail too soon).

It was about a 40-minute cycle one way. And a guaranteed 40-minute cycle back, even if I couldn’t be bothered!

And I promise you, I woke up with the full intention of cycling in today. Most of my resolutions start to falter in February…

However, the hazardous air quality outside made me question which act would get me ’fitter’.

Cycling to work in the smoke? Or driving to work instead?

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A practical solution is what I needed

I opted to drive and looked guiltily on as the braver and more determined souls cycled past me on Footscray Road, as I sat listening to the radio in traffic.

Sitting there, I heard how according to NASA, one plume of smoke has circumnavigated the world and is making its way back to Australia.

And how the haze could linger on for weeks if not months.

As trivial as it is in the grand scheme of things, I realised my ‘get fit’ resolution was under threat.

Unless in some weird paradoxical way, the act of not cycling through the smoke was indeed an act of ‘getting fitter’.

But I couldn’t even convince myself on that one…

A practical solution is what I needed.

What about an exercise bike I thought?

I could sit in front of the TV, peddling away, from the comfort of my air-conditioned living room.

That seemed an idea worth looking into.

Now in my mind, I had the usual image of your bog-standard exercise bike. You know the one. A cheap white aluminium frame with two black pedals, replete with Velcro foot straps and an odometer sitting on the handles.

A no-nonsense, noisy exercise bike.

But when I googled ‘exercise bikes’, that wasn’t what I found…

Disruptive fitness start-ups could be a big investing opportunity

Exercise equipment has changed a lot since I last looked.

A new wave of tech-enabled smart bikes, smart treadmills, and even smart mirrors are starting to take over the world.

These disruptive start-ups could be a big investing opportunity for you.

You see, the fitness market is valued at nearly US$100 billion, including gyms, classes, and exercise products.

And this is the very market companies like Peloton, Mirror, and Tonal want to take over. You might have heard of them?

Peloton Interactive Inc [NASDAQ:PTON] is the market leader in this new trend.

Peloton is an exercise bike on steroids.

Designed to mimic what it feels like to ride on the road, it has a 21.5 inch touchscreen display. And you can use the display to join group rides and participate in on-demand classes.

Here it is below:

So, what does it cost?

Well, all this will set you back US$2,245. Oh and an extra US$39 per month if you want access to the on-demand classes.

A bit steep you might be thinking?

That was my thought too.

But the newly listed company seems to be selling its gear to someone.

They made close to US$1 billion in sales in 2019, and analyst projections have this figure growing to over US$3 billion by 2022.

Profits?

Well, none on the horizon. But what does that matter, this is big tech we’re talking about (I joke of course).

To be honest, I’m a bit sceptical of this company’s prospects. It’s valued at $7 billion and doesn’t seem to have any major competitive advantages beyond a lot of marketing hype.

The price point isn’t cheap which makes me think uptake won’t be too explosive.

And at US$28.53 (US$7 billion market cap) a share, it seems a risky bet to me.

Though, if they can keep gaining market share (and converting buyers into subscribers. This is key.), then I’m willing to change my mind.

The other smart equipment company making a lot of noise is Mirror.

As the name implies, this piece of gym equipment is in fact a large, full length mirror.

The twist being that the mirror is also a LCD screen.

The product will set you back US$1,495, and like Peloton, you can book on-demand classes for a US$39 per month subscription.

The New York based company behind Mirror isn’t listed yet, but they did raise venture capital funds last year at US$4 billion valuation.

Sales figures are harder to come by here, however some reports suggested they were selling 650 units per month in 2019.

Like Peloton, I’m not convinced by this business model.

The price point is high. And the products — when you look beyond the hype — are fairly easy to replicate.

My cheapskate solution

Call me tight, but I decided against the indoor exercise option. Much too expensive. Plus the cycle to work in the outdoors was always part of the plan.

An easy hack to make myself do some exercise.

So instead, I opted for this:

Yep, a cheap face mask for $40.

Which meant I could cycle to work and also save $2,205. Plus a $39 per month subscription fee.

So Peloton clearly wasn’t for me.

And I’m not narcissistic (or buff) enough to exercise in front of a mirror. Even a smart one!

But I’m open to the idea that the smart fitness industry is a huge potential investing opportunity. It’s the kind of early-stage disruptive trend that can make you a fortune if you choose your picks wisely.

And I think you should keep it on your radar too.

I’m particularly keen on any VR (virtual reality) exercise products that come to market. Keep a close eye on that opportunity.

But as always, when it comes to new industries, be careful not to get sucked into the hype. You want to invest in long-running trends. Not short-lived fads.

Only time sorts out the two.

Good investing,

Ryan Dinse,
Editor, Money Morning

PS: We believe these rapid fire market opportunities are a fantastic way to grow your wealth. Which is why you’ll find us talking about the big trends that can uncover them. If that is something up your investment alley, then click here to learn more.