Crash Diet

Weighty Issues

Readers may recall that I considered buying Weight Watchers (WTW) for my November tranche near the end of November.  It is now down 32% just for 2014 and is down more than 40% since I reviewed it.  Here is what I said:

"when I first saw Weight Watchers on the screen, I was pretty excited. They pay a decent dividend, they have (in my mind) a competitive advantage and let's face it, the demographics in our country make this a growth business.  Reading about them, they have been struggling a bit lately with smartphone applications that have been taking business away.  I guess my view is that being in a group setting (live with real people) has got to be a motivator.  As I dug into the company a bit, I started to wonder, "where does all the money go"?  They had to have one of the worst balance sheets I have seen.  I promised not to let that sway me, but it is SO bad. Their total assets are $1.3b in total.  Of that $858m are intangible.  They have (grimace) $2.7b of long term debt.  So even including their goodwill, they have a book value (just using long term debt) of -1.4b! Puh-lease!  When you include all liabilities and just tangible assets, you get to almost -2.5b.  Not something I would race to buy.  In an average year they make about $300m, so it would take 8 or 9 years to get to a positive book value, assuming not reinvestment, no dividends etc.  Pass."

Now I think what is happening highlights the problem with the leverage I mentioned above.  With the advent of wearables and apps to help lose weight, WTW is seeing a decline in cash flow.  That is why they have stopped the dividend and I suspect there will soon be issues with meeting debt obligations.  With a weak balance sheet dependent on cash flow, you can get into trouble quickly.

The Stock Once Known as VCLK

I noticed the other day that VCLK has changed their name to Conversant (CNVR).  A few other things are happening.  I have noticed that LPS no longer is traded. It became part of Fidelity National, which actually looks very interesting.  Then VCI has also disappeared.

I skimmed through this week's Barron's. They did profile an Oil & Gas stock, EPL.  They were quite bullish and it did look interesting.  They also talked about OXY (a stock I used to own) and how it has 25% upside as they sell off some pieces.

MFI Index So Far

Index	Stock	Start	Last Month	Current	YTD Change	Monthly Change	Shares
1	ATVI	17.83	17.13	19.80	11.0%	15.6%	13.07
2	MO	38.39	35.22	35.57	-7.3%	1.0%	6.07
3	APOL	27.32	32.29	32.15	17.7%	-0.4%	8.53
4	AAPL	561.02	500.60	547.04	-2.5%	9.3%	0.42
5	AGX	27.56	28.41	27.94	1.4%	-1.7%	8.46
6	BAH	19.15	18.28	19.26	0.6%	5.4%	12.17
7	BKE	52.56	44.54	43.83	-16.6%	-1.6%	4.44
8	CA	33.65	32.09	32.99	-2.0%	2.8%	6.93
9	CACI	73.22	74.02	72.91	-0.4%	-1.5%	3.18
10	CHE	76.62	78.92	76.88	0.3%	-2.6%	3.04
11	CRUS	20.43	17.51	18.18	-11.0%	3.8%	11.41
12	CSCO	22.43	22.08	22.73	1.3%	2.9%	10.39
13	COH	56.13	47.89	48.08	-14.3%	0.4%	4.15
14	CRTX	9.49	9.48	9.50	0.1%	0.2%	24.56
15	DLX	52.19	48.55	46.44	-11.0%	-4.3%	4.47
16	DHX	7.25	7.00	7.01	-3.3%	0.1%	32.15
17	EBIX	14.71	13.58	14.72	0.1%	8.4%	15.85
18	EGL	33.40	38.31	40.65	21.7%	6.1%	6.98
19	GME	49.26	35.07	35.61	-27.7%	1.5%	4.73
20	GTIV	12.41	11.36	11.01	-11.3%	-3.1%	18.78
21	GNI	68.10	21.82	20.68	-69.6%	-5.2%	3.42
22	HLF	78.70	64.37	66.39	-15.6%	3.1%	2.96
23	IQNT	11.41	11.60	11.46	0.4%	-1.2%	20.43
24	ESI	33.58	29.40	31.11	-7.4%	5.8%	6.94
25	LPS	37.38	37.30	37.30	-0.2%	0.0%	6.24
26	LQDT	22.66	23.77	24.57	8.4%	3.4%	10.29
27	LO	50.68	49.22	48.00	-5.3%	-2.5%	4.60
28	MSFT	37.41	37.84	37.62	0.6%	-0.6%	6.23
29	MYGN	20.98	27.63	31.44	49.9%	13.8%	11.11
30	NATR	17.32	16.27	15.33	-11.5%	-5.8%	13.46
31	NOC	114.61	115.55	120.28	4.9%	4.1%	2.03
32	PDLI	8.44	9.10	8.43	-0.1%	0.0%	27.62
33	PFMT	10.30	8.53	8.02	-22.1%	-6.0%	22.63
34	PETS	16.63	13.23	13.76	-17.3%	4.0%	14.02
35	PRSC	25.72	26.39	26.72	3.9%	1.3%	9.06
36	QCOR	54.45	67.31	69.58	27.8%	3.4%	4.28
37	RTN	90.70	95.07	95.93	5.8%	0.9%	2.57
38	RAI	49.99	48.50	48.21	-3.6%	-0.6%	4.66
39	RPXC	16.90	16.22	16.44	-2.7%	1.4%	13.79
40	SAIC	33.07	37.29	37.25	12.6%	-0.1%	7.05
41	SWHC	13.49	13.09	12.64	-6.3%	-3.4%	17.28
42	STRA	34.47	34.96	34.40	-0.2%	-1.6%	6.76
43	RGR	73.09	76.17	73.44	0.5%	-3.6%	3.19
44	UIS	33.57	34.27	32.36	-3.6%	-5.6%	6.94
45	UNTD	13.76	12.11	10.58	-23.1%	-12.6%	16.94
46	USMO	14.28	14.26	13.95	-2.3%	-2.2%	16.32
47	USNA	75.58	59.87	75.59	0.0%	26.3%	3.08
48	VCI	34.25	34.00	34.02	-0.7%	0.1%	6.81
49	VGR	16.37	17.86	18.80	14.8%	5.3%	14.24
50	WTW	32.93	27.03	22.10	-32.9%	-18.2%	7.08
	Total	17,682	17,004	17,158	-3.0%	0.9%

One stock I could have, should have bought with recent tranche appears to be USNA.  I was a little gun shy after NUS debacle.  But USNA was over $90 just a quarter ago and then started February (same time as my new tranche) a notch under $60.  Already up 26% in past two weeks.

Well, it is snowing (again).  I have actually changed planes from Boston to NY as Boston is supposed to have blizzard conditions this evening.  So you from other side of Atlantic!