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Weight Watchers as an investment?

As I was going through my dieting experience, I was also managing my investments. Recently, Weight Watchers (WTW on NYSE) stock took a dive. While WTW was trading at about US$ 45 about a year ago, it kept decreasing until February when it went from around $30 to about $20. It has traded up to about the mid $20s recently, back down to below $20 and is up today by about $0.50 so far. (I am writing this late morning.) I have made some money trading the stock since February but have also lost some money by not hanging on to the stock when it would trade down again. Very recently, I bought a couple hundred shares at an average price of about $20.40 as it was going down. It has begun to increase somewhat although today many stocks are up including all three US indexes. Although I live in Canada, I invest primarily although certainly not exclusively in US stocks as I have found I can make more money trading these stocks and investing in them. Last year, the US markets outperformed the Canadian market by a large margin.

Getting back to WTW, it seems one of the problems with that stock is that, notwithstanding that it now has an online presence, it had for the most part missed or came late to the mobile market and missed out. Also, WTW was getting hammered by free apps. In CEO Jim Chambers own words, Weight Watchers “missed out on the mobility revolution” and it has “become less appealing in this changing market”. Does this mean that Weight Watchers is beaten and cannot come back? I don’t think so. There is a lot of goodwill in the Weight Watchers name and this brand has helped many millions of people lose weight. Further, it has a number of celebrities that either use its product or use it and also advertise for them, one being beautiful Jennifer Hudson who certainly looks even better since she began using Weight Watchers.

So is WTW a good investment? Well it depends on your point of view and your time horizon. It’s price has been moving around and is likely a good stock to trade at times due to the fact that it is going up and down regularly so traders try to buy low and sell higher. Remember, traders are people who hold stock for hours to perhaps several weeks or perhaps longer, so they are short terms “investors”. Now may be a good time to buy WTW if you are prepared for the stock to possibly go down further in the near term of perhaps 6 months or more if its results continue to disappoint while it figures out what is wrong and how it can turn things around. If you buy and hold the stock until perhaps late 2015 or 2016 and WTW successfully shows that it has turned its business around by getting its sales and profits back on track, you may be able to make some decent money on this stock. But there certainly is risk in this as it must turnaround its business and continue to grow, profitably. This is far from a certain thing.

BUT, as always, you MUST be willing to lose some, perhaps much of the money you invest in this or any stock. To give you an example of something I thought would never happen, I bought a stock for about $4 and then continued to buy it as its price went down until I held about US$ 4000 worth of stock. I purchased this stock on the advice of a reputable investment manager, but this stock was part of a larger investment of several hundred thousand dollars. About a year after I bought the stock, it went to zero. Yes ZERO. The company was accused of misrepresentations and there was no value in the stock as investors ran for the exits!. Geez was I pissed at the investment manager that advised to buy. BUT, he advised to buy a basket of 30 to 50 stocks, so while this stock went to zero, other stocks went up by 25 -100%, if you bought and held for several years.

Please remember that this or any post here does not constitute advice to buy or sell stocks. I am not a financial professional but just a lay person. This and other posts on this website are only here to promote discussion and to provide information. You should always consult an investment professional prior to making any investment. Be careful when you invest and who you rely upon.




{ 3 comments… add one }
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