| Life
Time Fitness (LTM) -- An "Up-and-Coming Bellwether" With
Room to Run |
Published: June 4, 2005
Most investors
across the country hold at least a few of today's top blue-chip stocks
-- companies like Microsoft (MSFT), Wal-Mart (WMT), Home-Depot (HD),
Dell (DELL) and others. But although these bellwethers are likely to
remain stable in the years ahead, these lumbering giants have already
reached maturity and most are now well past their prime. As a result,
they're no longer the best place for investors to park their money.
Instead of
investing in the bellwether giants of today, I think a better strategy
is to look for stocks that are on their way to stardom -- companies that
have already proven themselves but have yet to fully expand their
concept across the country/world. I call these stocks
"Up-and-Coming" Bellwethers. These established companies offer
the stability of proven, successful business models, yet still have
plenty of growth potential ahead of them.
One company that
fits this profile perfectly is fitness center owner Life Time Fitness
(LTM). Looking ahead, I fully expect the stock to continue its upward
surge in the months and years ahead as LTM expands its footprint across
the country and draws additional patrons to its existing locations.
Life Time Fitness is well
positioned for further gains thanks to the following three factors:
1. Superior Product
Offerings -- The company's fitness centers average a little over
100,000 square feet in size -- that's roughly the size of your average
Home Depot or Target Superstore. By comparison, most health clubs are a
fraction of that size. For example, the average Bally's club is closer
to 30,000 square feet, about one-third of the size. This size reflects
the broader range of services offered at LTM centers, especially at the
company's newest, most modern facilities. This includes equipment like
rock-climbing walls, multiple pools and outdoor volleyball courts --
items rarely found at your average fitness center. Also important is
that by increasing the size of their facilities, customers have reported
fewer problems with long waiting lines to use equipment. By offering
superior -- and much newer -- facilities relative to the competition,
LTM is poised to capture a large chunk of the U.S. fitness center
market.
2. Tremendous Growth
Potential -- Life Time Fitness remains relatively small and
underexposed geographically. With just 41 fitness centers in 8 states
(that compares to 418 centers in 29 states for competitor Bally's Total
Fitness), LTM has yet to fully expand its footprint across the country.
In fact, there are plenty of markets that are totally untouched by LTM.
For example, to date LTM hasn't opened a single location in two of its
largest potential markets, California and New York. Going forward, Life
Time should be able to deliver tremendous growth by simply replicating
its business model in new markets. Along those lines, the firm plans to
open six new locations in 2005 -- a solid +15% increase over 2004
levels.
3. Rising Institutional
Ownership -- At the start of 2005, institutions held just 30% of the
company's outstanding shares. That ratio has since jumped to more than
37%, and this figure should continue to rise as the company gains scale
and develops a longer operating history (both of these items should help
support the share price).
With the above factors in mind,
I believe Life Time Fitness (LTM) would make an excellent addition to a
well-diversified long-term growth portfolio.
|
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