I watched Charles Barkley host Saturday Night Live the other night, and two things were readily apparent: Sir Charles’ painful lack of comic timing, and his newly trimmer waistline. Apparently the former NBA great has lost 27 pounds on Weight Watchers.
That got me thinking about all the other Americans trying out weight-loss programs this month as part of their New Year’s resolutions. Weight-loss companies must make a killing this time of year. Conversely, their stocks must be in line for some major gains.
I looked it up, and sure enough, “weight-loss stocks” are off to a fast start in 2012. Weight Watchers International (NYSE: WTW) stock is up 22% for the new year, Nutrisystem (Nasdaq: NTRI) is up nearly 6% and Medifast (NYSE: MED) is up 7.7%.
Weight Watchers is building on its 2011 momentum. According to a recent Barron’s article about weight-loss stocks, Weight Watchers’ sales grew by 26% in 2011, an increase from 3.7% revenue growth in 2010. That performance has boosted the company’s stock by 60% over the last 12 months. Weight Watchers’ stock is currently trading at $67.19 a share.
Herbalife (NYSE: HLF), which sells nutrition and weight management products direct to consumers, is the biggest “weight-loss stock” by market capitalization. Though the stock hasn’t received the same boost that some of its competitors have in the first week of 2012, over the last three years Herbalife's stock has risen 372% to earn a market cap of $6.05 billion.
New Year’s resolutions only last so long – an estimated 25% of them are broken within the first week of January. So companies that can produce year-round returns are more worthwhile investments than those that spike sharply after the New Year’s health kick only to come crashing back to earth in February and March. Nutrisystem, for example, while up 6% in the first week of 2012 trading saw its stock decline 39% in 2011.
A one-month bump can only get a stock so far. Real progress requires consistent performance over the long haul – much like losing weight. For the long-haul, I prefer Weight Watchers - even if it could use a more eloquent spokesperson.