In Search of the Perfect Investment

My friend calls. His niece works in the weight losing business. She said it sucks. With all the free “health” phone apps and health bracelets (“how many steps did I do today?”) and middle class income flat, the weight losing business is losing clients.

Short Weight Watchers. Now if only he had told me that six months ago. Try this:

Then he sent me this Barron’s piece of three days ago:

Weight Watchers: Why It’s Heading to $5

Credit Suisse analyst Glen Santangelo and team explain why they downgraded Weight Watchers (WTW) to underperform and cut their price target on its shares to $5:

In the wake of the recently issued F15 guidance, it has become increasingly apparent that the product and marketing changes employed by the company for this January weight loss season were less effective than expected. Management continues to believe the company’s strategy of increased consumer engagement is the right track, but acknowledged execution around January 1st could have been better. On the recent quarterly call, management described in broad strokes its action plan moving forward, and our view is it’s not going to be easy. Accordingly, we have revised our forward estimates taking a more conservative view with respect to revenue, EBITDA and earnings. With the continued deceleration of EBITDA and cash flow, investors have placed increased emphasis on the debt load and upcoming scheduled payments. Given the timing of the ~$300M payment in F16 and the ~$2.1B payment in F20, management has been forced to take a tougher line on costs and cash management. We believe going into “cost-cutting mode” will limit the company’s flexibility and make it increasingly difficult to navigate the competitive landscape. We are reducing our F15-F16 EBITDA estimates to $233M and $220M from $234M and $232M, respectively, and introducing our F17 estimate of $202M. We are revising our PT to $5 (from $14) which assumes the shares trade at ~10-11x EV/EBITDA, inline with the company’s historical 10-year average. Given the limited visibility into Weight Watchers’ ability to navigate the competitive landscape amidst its significant leverage, and views around the earnings outlook & valuation, we are downgrading our rating to Underperform.

Shares of Weight Watchers have dropped 3.8% to $9.75 at 10:31 a.m. today, after being down as much as 11% earlier this morning.

Today they’re down to $8.72.

Here’s another one:

What about this Cramer-fav? Its drugs are only in Phase 2 and there are millions of competitors:

Everything moves in crazes. Right now the market is nuts for biotech. There was a time a few years ago when you couldn’t give your biotech stocks away. Now they look like tech stocks did at the end of the 1990s.And we all know what happened then.

Look at these two:

I still think IBM is a good short. For more on shorting, read yesterday’s blog on The Activist Short — click here.

The greatest knives are Global. Here are two:

We have three of their knives, including the two above. They’re really good. Amazon and others have them — probably cheaper, too. The pairing knife is great for opening envelopes. And bread knife for cutting bagels.

The old is still moderne. “Where the old method is still modern” is a line in a German song called “The bed. ” But that might apply to my favorite camera:

Nothing this size and this greatness has emerged in the past couple of years since the G15 was introduced. Nothing! And I watch and wait.

The good news is the price is down to $449. I paid over $200 more. Here’s the Amazon link. Click here. But you can get it cheaper (and without tax) by googling.

Harry learns Polish.

Good morning is Gin Dobri. Only it’s spelled (in Polish) Dzien Dobry.

I love you is Kocham cię. I defy you to pronounce that.

This investment sucks is Ta inwestycja bani.

Yesterday’s telemarketing call. I don’t make this stuff up.

Is Mr Harry Newton there?

You’re from?

Security Products Magazine.

I’m afraid Mr. Newton died last week.

No problem. Have a nice day.

Click.

Harry Newton who admonishes: CHECK. CHECK. CHECK. Don’t ever give your cellphone number to any vendor — online, brick and mortar, anywhere. We bought a house here in Indian Wells. Somewhere in the closing docs was my cellphone number. Dumb. Now, every broker and his uncle and niece and mother calls at six in the morning (9:00 AM New York time) and asks if I want to sell the place. Heck no, I just bought it. Do I look like a total idiot? …

Anyway, they’re offering too little.

In case you missed last week invitation: