The 2011 Weight Loss Trade
Millions of Americans are waking up this morning with growling stomachs and sore muscles. Such are the side effects of New Year's resolutions.
Americans have spent the past six weeks or so feasting, drinking, celebrating, and expanding. It was gluttony at its finest. But now it's time to get back in shape, drop the extra pounds, and prepare for swim suit season.
Studies show the average American adult packs on an extra four pounds over the holiday season. So by the time the new year arrives, nearly all of us resolve to drop the increased weight and maybe even lose a few of last year's excess. I haven't seen any studies on this yet… But it's a pretty good bet "losing weight" tops most people's lists of New Year's resolutions.
This obvious fact hasn't been lost on weight loss companies. If you watched "Dick Clark's Rocking New Year's Eve" last Friday night, you saw the lighted ball drop in Times Square at midnight. One minute later, you saw the new Weight Watchers commercial featuring a trimmed down Jennifer Hudson.
NutriSystem wasn't far behind with its new Marie Osmond ad campaign.
Yes, weight loss is a big deal this time of year. It's as much of a tradition as tossing the tannenbaum out to the front curb. And it's big business for weight loss companies.
But if you're hoping to make a few bucks betting on weight loss stocks, you might want to think again. You may be too late… or too early.
Take a look at this five-year chart of NutriSystem (NTRI)…
Notice how the stock tends to peak in early January each year… and then suffer a significant decline. The Weight Watchers (WTW) chart looks similar.
It looks like any rush of new business these companies see as a result of New Year's resolutions gets priced into the stocks well ahead of time. Instead of rallying after the New Year, the diet companies tend to decline for the first few weeks.
Ironically, a far better time to jump into stocks like NTRI and WTW is about midway through the first quarter – right about the same time most folks break their resolutions.
Best regards and good trading,