Flabby America needs to pump up, but which of these companies can help?

 

More than one hundred million Americans are obese, and another one hundred million are overweight. Excess weight is the epidemic of our age, and though the problem has been around for a long time (it grows inexorably worse only very slowly), it is not often that anyone attempts to quantify the disease’s hellish toll. In 2013, Columbia University reported that 20% of all deaths in America could be linked directly to excess weight, but cautioned that the number was deceptively low, because excess weight also ends lives in many indirect ways; Columbia did not count, for example, suicide.

Those who live with excess weight inevitably suffer as a result, for the disease is not only deadly, but disabling and disfiguring. It causes chronic physical pain in many, and inflicts some degree—sometimes the most extreme degree—of emotional trauma on all who experience it. Let’s assume for the moment that two hundred million Americans would not willingly endure such a fate if it could be prevented by an extra fifteen-minute walk after dinner each day, but that’s another way of saying what you almost certainly already know: losing weight is hard.

Ah, but once a year, the universe grants us the clarity of spring. If, as we try on our lighter clothes, we find that we have expanded somewhat over the winter, it is altogether too easy to imagine what we will look like in our really light clothes, unless of course, we do something about it, and do it fast. But what to do? Well, that’s the question the companies on today’s list want you to be asking, and they all want you to believe that part of the solution involves giving them money. In some cases, that may be a good idea, as some of what they offer can be effective. But will it make shareholders money? We’ll have to dig in deeper to find that out.

As always, consider these ideas to be just that, ideas, and do your own research before making any move on the stock market.

Weight Watchers (WTW)

Allow me to weigh in on Weight Watchers. Once the undisputed king of the weight loss world, this company fell behind the times and simply found that it had too many competitors coming at it from every direction, although the immediacy of online, and even more so, mobile diet programs, was probably what really derailed Weight Watchers. The stock was on a long slide for years until November of last year, when Oprah Winfrey paid $43 million for a ten percent stake in the company. Since then Oprah has succeeded in creating excitement, but membership is still falling. Sorry Oprah, but the world just doesn’t need Weight Watchers.
WTW

Chart courtesy of www.stockcharts.com

Planet Fitness (PLNT)

If you have ever watched a lacrosse ball bounce its way down a long, low hill, you can visualize what shares of PLNT have been doing since the company went public back in August of last year: lots of really impressive bounces, but always going lower and lower in the long run. Planet Fitness is, of course, a chain of fitness centers. The business is divided into three segments: franchise, corporate owned, and equipment, and the company’s strategy of profiting by maintaining contracts with franchisees to purchase new equipment seems to be working. The problem is that the company failed to report either new members or lost members in its last earnings report, and the percentage of money the company is making from equipment sales has been rising. That suggests the core business is ailing, and won’t ail long, as the company is loaded to gills with debt. Best invest off-planet.

PLNT

Chart courtesy of www.stockcharts.com

VIVUS (VVUS)   Arena (ARNA)   Orexigen (OREX)

Hoping for a pill that will help you lose weight? Chances are very good that you are signing up for an endless stream of broken dreams. Nine out ten drugs touted as obesity cures wind up not working, and the ones that do work are even worse: PhenFen worked, but it destroyed people’s heart valves. Meridia worked a little, but it gave people heart palpitations. Rimonobant worked but it made people depressed and suicidal. More recently, VIVUS, Arena Pharmaceuticals, and Orexigen all tempted the market by once again dreaming the same great dream. One glance at the charts here will tell you that these dreams eventually turned into nightmares.

So why won’t people just stop? Well, there are two hundred million Americans, not to mention hundreds of millions more around the world, who would swallow fire for a weight loss pill. (That’s just an expression. Don’t actually swallow fire. It doesn’t work.)

VVUS

ARNA

OREX

Charts courtesy of www.stockcharts.com

Zafgen (ZFGN)

Medical science is never going to stop trying to get a weight loss pill to work—and work without doing more harm than good. In February, a company, Zafgen, proved with a successful Phase II clinical trial that its drug, Beloranib, really does help people lose weight. There is a problem, in that the drug appears to have maybe killed a couple of people in an earlier clinical trial. That would frequently be the end of the discussion, but remember, 20% of Americans die of their excess weight, so unless Beloranib kills millions, it still has a chance. Now that there is more and more good news coming in about Beloranib’s efficacy, many traders are seeing ZFGN as a gamble worth taking, and I agree, though it is wildly speculative, so don’t bet the farm.

ZFGN

Fitbit (FIT)

Fitbit is having a rough year, at least insofar as it is no longer growing at nearly the same rate. After FIT’s IPO glow wore off, the market began to see it not as a revolutionary product, but simply as one of a rapidly growing number of companies making “wearables” of dubious value.

However, there are people who know Fitbit’s value, and they may be the people who have the final say. Who, you ask? Hospital care-givers. Consider: a friend of mine went into the hospital not long ago, wearing a single Fitbit. While in the hospital, however, she acquired three more. Why? Because every time she saw a new specialist, the specialist would slap on a Fitbit, thereby bypassing any read tape and ensuring he got the info he needed. Does it seem like giving three Fitbits to a patient who already has one would be inefficient and expensive? It seems so, yes… until you consider how much money hospitals spend on conventional methods of monitoring patients and recording their essential numbers—at which point it begins to seem as though hospitals may be on the verge of saving themselves a bundle with this new strategy.

By way of disclosure, I own a few shares of FIT which are 10% down at present, but I have a very good feeling that this quarter’s earnings aren’t going to be as bad as the Street fears.

FIT

Julian Close

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.

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