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  • Weight Watchers: A Value Opportunity Or A Value Trap? [View article]
    Thanks for providing your thought process. I agree with your point that peer support and motivation are key to successful diets, and this is in part why Weight Watchers has been able to maintain its success for such a long time. However, revenue from meetings is not much different from where it was five years ago. One could argue that this is simply a cyclical result of the recession, but during this time the internet segment has had a CAGR of 28%. If people who were introduced to WW via its internet site also went to meetings, I don't think it is unreasonable to expect that the meeting segment would have a CAGR higher than 0.7%. It's possible that the online segment is cannibalizing some of this growth, but I'm uncertain about this and would rather not speculate. As I'm sure you know, stock prices trade mostly on future growth. WW's prospects for growth are clearly in the online sector, where it does not possess a significant competitive advantage and has competitors which provide free services. The only way we'll know is in hindsight 6-12 months from now. I'll keep watching WW closely in the investment time horizon you suggest.
    May 16, 2013. 01:45 PM | Likes Like |Link to Comment
  • Weight Watchers: A Value Opportunity Or A Value Trap? [View article]
    Thank you for your comment. It's always good to hear substantive disagreement. To address a few of your key points:

    1) Sure, some fads come and go, but I think the bulk of my argument is not that a fad is going to hurt Weight Watchers. Rather, I simply pointed out that despite the success of Weight Watchers and the scientific validity of its diet programs, it has trouble insulating itself from fads. In addition, I mention its competitors only because Weight Watchers itself considers these companies as its competitors, not that any one of these companies is a significant threat.
    2) You make several good points, but I think I do acknowledge the strength of Weight Watchers as an industry leader. While its management has been solid in the past, this has to be formulated into an actual argument about the potential upside of the stock. In retrospect, the share buyback doesn't look like such a smart decision. "40 is a buy and bargain" is not an argument.
    3) You're right about eDiets.com. The second time it is mentioned in the article is a mistake.
    4) My argument was never that DIY dieting is a new phenomenon. Rather, that DIY dieting is being made easier with smartphone applications which provide services which are more accurate than Weight Watchers for free. This means that DIY dieters, a growing and much larger market, will be captured. In my opinion, this is not a "fad." Never in the past have we had such easy methods to track nutrition and make decisions without the aid of a paid service. The Points system that Weight Watchers became famous for popular in large part because of maintaining accuracy while offering both convenience and consumer choice. Obviously Weight Watchers would leverage this trend, but my chief argument is that its rapid growth in the online segment is unsustainable, while its other segments are experiencing stagnant growth or decline. How do you think that WW can compete with free services that now offer exact nutrition data, are easy to use, and allow users to eat anything as long as they keep a calorie deficit?

    Given your experience in the industry, I would love to read why you think WW is undervalued, and exactly how much upside it has. It seems like you have a lot more to add to this discussion.
    May 15, 2013. 11:20 AM | Likes Like |Link to Comment
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