Investing in your passion can bring you great joys
Do you love the world of adventure sports and sports equipment? Have you ever thought about investing in your passion? Outdoor equipment is a booming industry. More and more people are looking to get away from the big cities to get into nature and experiment with outdoor activities. Investing in the growth of the sector is possible and easier than it might seem. In addition, we can get good returns by taking exposure to this industry.
Around 250 million people participated in an outdoor activity at least once during 2021. There are more than 68 million regular athletes in adventure sports and more than 10 million climbers globally according to the Outdoor Foundation. These participants account for a whopping 1.7 billion euros in annual spending. This includes spending on outdoor leisure products, from footwear to equipment, travel and accommodation, as well as guides or active tourism services.
When the outdoor sector is combined with the global travel industry, which goes hand in hand with outdoor recreation, it is clear that the market has enormous potential as an investment opportunity, as these figures have only grown in recent years, and all indications are that they will continue to do so.
The market and its future
But who are the players in this market? If we consider outdoor enthusiasts who breathe, live and travel to hike, climb or run, it is clear that they would be the main representatives. However, there is also another group of people, some 150 million people globally, who want to be active outdoors but are unable to do so due to various obstacles. Family commitments, high costs, lack of outdoor knowledge and skills or physical disabilities are some of the things that prevent this group from increasing the revenue potential of the outdoor industry. This is a sign of the industry’s enormous capacity to continue to grow in the long term, integrating even more entry-level people with new solutions, value propositions and technologies.
An Outside Business Journal analysis shows that the sector has outperformed other broader market indexes, such as the S&P 500 and Dow Jones Industrial Average, with impressive gains over the past five years, although it still lags behind the booming tech industry represented in the Nasdaq 100 index.
A compilation of the top companies in the sector between 2016 and 2021 showed a 5-year return of +80%, by +70% for the SP500, +60% for the Dow Jones and +120% for the Nasdaq index. In simpler terms, if we had invested €1,000 in this basket of outdoor companies we would have obtained €1,861 five years later. This does not include the dividends paid on the shares, which would increase these returns.
Looking ahead, the sector as a whole looks set to continue to perform well. New generations are still interested in outdoor activities, but in a different way than previous generations. In the past, participants sought to master one or two sports, such as climbing, kayaking or fishing. Today, however, it’s about experimenting with a wider range, with the focus on recreation and social experience. The companies that do best in this new context will be those that maintain a close proximity to the customer through social networks and e-commerce, as well as through live and online events.
On the business side, merger and acquisition activity among the major outdoor brands will continue to be the order of the day. In such a competitive market it is sometimes faster to acquire than to build organically.
Steps to invest in outdoor stocks
1. Search for publicly traded outdoor companies.
You can find these companies by using stock exchange listings or by taking the Artiga Outdoor Brands Index list, which compiles the world’s leading companies.
2. Choose the actions that interest you
Ask yourself what kind of gear and equipment you use and why, relative to other brands, this is usually a good place to start. If you’ve already done your homework to buy the “best” gear for your own needs, chances are it’s also gear that’s working well because so many people trust it and buy it. If you’re a proponent of high-quality, long-lasting gear, chances are that other people do too and you’ve built up a loyal following; if so, these are good ones to start with.
3. Choose the actions
Just as you look for high-quality equipment, look for high-quality stocks that can outlast any fad and have a solid financial foundation. Watch the market and research the stock’s track record. Seek advice if you are unsure how to go about it. Read hiking, kayaking, climbing, cycling, diving, surfing and other outdoor gear magazines carefully and chat with specialists in this sector. What emerging technologies and trends are starting to appear now that could prove to be very important in the future, 5 or 10 years from now? Examples of successful items that are now selling in large quantities but had little or no presence before are GPS and hydration systems.
4. Learn about the market
If you are new to the stock market, consider attending a specific, quality course, either online or in-person. It is worth the small investment to better understand everything about investing. Read books on investment and management to consolidate this knowledge. If you are already knowledgeable about the stock market, go straight to homework by analyzing the stocks you are interested in.
5. Open a brokerage account
If you do not yet have an account with a financial intermediary, you will need to open one. Choose a company regulated by the CNMV that offers a good platform, personalized attention and adjusted commissions. In Spain we recommend DeGiro, SelfBank and InteractiveBrokers.
6. Buy the shares
Once you’ve done your homework and figured out which company or companies best suit your needs and interests, it’s time to start investing. If you like the gait, but the numbers are making your head spin, make sure you have a financial advisor.
7. Think long term
Invest in your stocks with a long-term view. This way, you can earn higher returns over time and any small losses that may occur in a short period due to the inherent volatility of the markets will be recouped over time. Investing may not be as impactful and fun as climbing a mountain or kayaking down the rapids, but over time, you can reap good rewards both financially and personally by growing the sector you are passionate about.