Updated with stock ratings.
NEW YORK (
) -- The world of vitamins and car stocks is calling, but housing is another story. Wall Street analysts explain which nutrition retailers make for good stocks and why investors should be careful picking homebuilding stocks this month:
1) Vitamins Are Good For You
Demand for vitamins may boost the stocks of nutrition retailers.
JP Morgan analysts say the vitamin industry is expected to grow 4% to 5% domestically. People are paying more attention to healthy living, consumers are more open to nutritional products and an aging population is increasingly focused on health issues. All of these trends, the firm says, will help drive growth.
"Americans love 'magic in a bottle' and [the industry] can be viewed as an inexpensive offense/defense to health challenges," writes the firm.
The firm's top pick stock remains
GNC Acquisition Holdings
(GNC - Get Report)
. "GNC is in the heart of the momentum lift... the combination of strong product sales through company-owned stores and higher margin domestic and international franchises, third-party contract manufacturing, e-commerce and corporate partnerships highlights GNC's potential for consistent earnings upside," it explains.
The second stock JP Morgan likes is
(VSI - Get Report)
, although this company, it says, may be better for the long term. "We like VSI for many of the same reasons as GNC," it writes.
However, the firm notes that Vitamin Shoppe is a "classic retail growth story" with less exposure to growth in sport nutrition. "GNC has more levers to pull for EPS upside given its multiple divisions and improved brand management while VSI doesn't annualize stepped up expenses until the third quarter of 2012." In other words, GNC looks like a better short-term play but won't be able to beat out VSI in the long run.
JP Morgan estimates that total revenue in the vitamins, mineral and supplements industry will have risen 6% in 2011, after 5% in 2010. "The largest drivers from 2005 have been vitamins, sports nutrition and specialty supplements, with average annual growth in the high single digits. For 2012, we expect continued solid mid-single digit growth," it writes.
GNC is rated a strong buy by five of eight analysts covering the stock, according to TheStreet Ratings. Vitamin Shoppe is rated a strong buy by eight of 14 analysts covering the stock and a hold stock by four analysts.