When one thinks about safe stocks to buy, investors generally think of blue-chip large-cap companies such as Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) or Microsoft (NASDAQ:MSFT).
However, manufacturers of beds, sleep apnea machines and proper lighting are participating in a $585 billion global sleep economy.
A November 2023 article from Harvard Health Publishing, the media division of Harvard Medical School, published 8 secrets to a good night’s sleep.
“We all have trouble sleeping from time to time, but when insomnia persists day after day, it can become a real problem. Beyond making us tired and moody, a lack of sleep can have serious effects on our health, increasing our propensity for obesity, heart disease, and type 2 diabetes,” Harvard Health’s introduction stated.
There is no question sleep disorders are a huge problem to daily productivity. It’s estimated that poor sleep costs the U.S. economy $400 billion annually, which represents 2.3% of the country’s GDP.
I’m confident the eight secrets will lead us to the safe stocks to buy benefiting from the sleep economy.
Planet Fitness (PLNT)
The first of eight secrets on Harvard Health’s list is exercise.
“Going for a brisk daily walk won’t just trim you down, it will also keep you up less often at night. Exercise boosts the effect of natural sleep hormones such as melatonin,” the article states.
For those who want to formalize their exercise, Planet Fitness (NYSE:PLNT) is one of the fastest growing health club franchises in the U.S. with 2,599 locations.
While it makes decent money, its shares just don’t seem to be able to maintain any kind of momentum over the long haul. PLNT stock is up nearly 10% over the past year, considerably less than the 25% gain by the S&P 500.
However, if you bought shares in its August 2015 IPO at $16, and still hold, your compound annual growth rate is 18.5%. If you look at its first-quarter numbers, there’s nothing that screams train wreck.
Revenues were up nearly 12% over Q1 of 2023. System-wide sales, which is all the revenue of its franchisees (2,341 locations) and corporate-owned stores (258), rose 9.1%. System-wide same-store sales grew 6.2%, and adjusted EBITDA jumped 17.8% to $106.3 million. It has a healthy EBITDA margin of 43%.
No wonder it’s buying back a ton of its stock.
Tempur Sealy International (TPX)
In early May, Tempur Sealy International (NYSE:TPX) reported Q1 of 2024 results. Its sales fell 1.5% to $1.19 billion, missing the analyst estimate of $1.21 billion. However, its adjusted earnings per share were 50 cents, two cents higher than Wall Street’s estimate.
The company is set to close its $4 billion acquisition of Mattress Firm, the largest mattress retailer in the U.S., by the end of 2024.
“Regarding the pending Mattress Firm transaction, which we have been working on for two and half years, we believe it will unlock benefits for customers and shareholders. …As previously disclosed, we anticipate the FTC will complete its review in the second quarter and we are targeting closing the transaction in 2024,” stated CEO Scott Thompson in the Q1 2024 press release.
Up 150% over the past year, but down nearly 8% year-to-date (YTD), now is the time to buy TPX stock.
Resmed (RMD)
Number eight on Harvard Health’s list of secrets to getting a better sleep is to get checked for common sleep disruptors such as sleep apnea. Resmed (NYSE:RMD) is one of the biggest providers of CPAP (continuous positive airway pressure) sleep apnea machines.
Barron’s discussed Resmed in a June 27 article. Contributor Jacob Sonenshine argued that the 10% decline of RMD stock in the past week was entirely overblown. Findings from Eli Lilly (NYSE:LLY) showed its Zepbound weight loss treatment reduces obstructive sleep apnea severity by as much as 63%.
“Several companies have been selling GLP-1s at scale for a while, and demand for Resmed’s products have not taken any visible hit. Sales for the March-ended fiscal third quarter rose 7% to $1.19 billion from a year ago, the same type of moderate growth the company has enjoyed for years,” Sonenshine wrote.
Also, Sonenshine reported comments from Morningstar analyst Shane Ponraj. The analyst believes GLP1s won’t affect the market for Resmed’s products.
In 2024, analysts expect Resmed to generate $4.7 billion in sales, rising to $6 billion by 2026, a compound annual growth rate of 13%.
Certainly, its shares aren’t cheap. RMD trades at 26.0x its 2024 EPS estimate of $7.27 and 21.6x its 2025 estimate of $8.78. But they are well off the September 2021 all-time high of $301.34.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
