NutriSystem (NTRI) As A Short Term Trade

The Dynamic Wealth Report
January 9, 2008

A New Year's Resolution Trade

“I know it’s hard to do but you got to do it.”  Those were the words a friend of mine uttered at a recent dinner party.  Carl, always the center of attention at social events, has reached a new level of admiration.  You see, Carl is a personal trainer.  He works with everyone from hard charging CEOs to stay at home moms, Carl sees them all.

This time of year he’s always very popular.

As you know, virtually every single person has some kind of resolution for the New Year.  The most popular . . . weight loss.

I know it’s on my list.  For the last 10 years I have had some variation of that same resolution - get in shape / lose weight / work out more.  They all mean the same thing and every year I try.

And I know I’m not alone.

After many years of this, I decided that since I'm probably not going to keep my resolution once again, maybe I can make some money from it.

With weight loss, the dream is often easier to achieve than the reality. 
As such, this time of year typically brings a resurgence to those companies that try to help people lose weight.

NutriSystem (NTRI) is a perfect example.  They're a weight loss management company that delivers portion-controlled prepared meals. No cooking, measuring, preparing, shopping . . . all the hard work is done and everything is delivered right to your door.

The company even has counselors available online and over the telephone to help when a food crisis moment hits.  Over the last 12 months, the company has revenues of more than $773 million.

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Another company, EDiets.com (DIET), is a web destination providing diet, fitness and healthy living advice.  The company claims more than 2 million customers over the last 10 years.  They enjoy flexibility in that they work with lots of other diet plans including Atkins and Slim-Fast, which allows for the customization of information and advice.

Herbalife (HLF) provides weight loss management supplements to customers.  As opposed to diets or exercise programs, they focus on providing pills, vitamins, and shakes to aid in weight loss.  They have a very unique distribution network, with sales being made by customers who are using the products themselves.  Over the last 12 months the company has revenues of more than $2.1 billion.



Right now, Nutrisystem looks like a great value.  The stock currently trades around $25 down from a high of over $70 just a few months ago. The drop in the price can be attributed to missing an earnings estimate. You see, in June, GlaxoSmithKline introduced an over-the-counter weight loss drug (Alli) which was backed by a huge marketing budget. Nutrisystem lost a few customers but appear to be on the comeback trail.

I think the market reaction was overdone and NTRI is due for a quick rebound.  The bad news is in the past and they're in the height of their sales season.  For an extra kicker, look at the March or June calls.

That’s all for now . . . Carl is waiting for me at the gym.

•   Gold ($884 per ounce)

We continue to see new highs in the gold market.  Recent news points out that ETFs set to track the price of gold now hold more in reserves than some central banks.  Clearly, gold is in favor with the investment community.

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