Diet Industry Serves Up Profits
For the markets, 2018 was a year to forget.
The Dow Jones Industrial Average posted its worst annual return in 10 years.
The S&P 500 and Nasdaq both ended in the red. And tech stocks tumbled into bear market territory as the FAANG trade faltered.
But hedge funds had a reason to celebrate…
For the first time in a decade, the average hedge fund’s return beat the market’s.
That’s because even though hedge funds lost money in 2018, on average they did slightly better than the S&P.
The only other time in the past decade the hedge fund industry beat the market was 2008… and the story was the same.
Back then, the S&P lost 37%, whereas hedge funds returned a negative 19.03%.
I’m sure plenty of managers cracked open expensive bottles of champagne to celebrate their “outperformance.”
Meanwhile, for much of the past six years, I’ve been the top-performing strategist at my company. I’ve set multiple records as I’ve crushed the broader markets.
In the early days of last year, I was the lone voice that predicted a “Great Correction” in 2018.
We got precisely that. And my readers profited.
The core of my success has been pulling at the threads of market lies, myths and hypocrisy.
Because you can beat the market, no matter what you’ve been told.
And it often starts with understanding the behavior of the most powerful force in the economy: the consumer.
The Gluttony Gauntlet
During the holiday season, overindulgence is the norm.
From October to New Year’s, there’s one face-stuffing celebration after another.
So it should come as no surprise that the top five pizza-consuming days are Halloween, the Super Bowl, New Year’s Eve, the night before Thanksgiving and New Year’s Day.
Many of the top beer- and liquor-drinking days are the same.
And that’s why I always recommend that investors load up on shares of pizza and beer companies during the last quarter or so of the year. That’s when those companies feast on our gluttonous nature.
But there’s another side to this story…
The reality is holiday weight gain is a real struggle. And in many cases, it can take up to five months to lose those extra pounds.
Greasy faced and hungover, many people participate in a little-known event that takes place shortly after New Year’s…
January 5 is its own holiday. It’s the day that sees the least amount of pizza consumption and beer drinking.
It’s the day when we stop gorging (at least until the Super Bowl) and start to institute lifestyle changes. This is a lucrative opportunity for investors – beneficial to both our physical and financial health.
Fat Profits From Shedding Pounds
The top three most popular New Year’s resolutions are…
- Diet and eat healthier.
- Exercise more.
- Lose weight.
This creates a boom time for companies that cater to those goals.
You’ve seen the commercials…
Oprah is busy doing her pitch for Weight Watchers (Nasdaq: WTW). (She also happens to be a major shareholder of the company.)
Meanwhile, Marie Osmond is making her case for Nutrisystem (Nasdaq: NTRI).
To see how much of an impact New Year’s resolutions – as well as holiday gluttony – can have on these companies, just check out the quarterly revenue for Weight Watchers.
It’s not a nice, steady, sequential incline. It’s jagged – what I call a “sawtooth pattern.”
And this is something most investors (and hedge fund managers) overlook.
The fourth quarter is the slowest of the year for diet system companies.
That’s because no one tries to lose weight during the final months of the year. It would suck the joy out of the holidays!
Revenue falls, and shares of Weight Watchers tend to fall along with it.
But look at that projected spike…
That’s the first quarter.
This is what the industry refers to as the start of diet season. And this season stretches through the second quarter before business starts slowing down again, right when kids are heading back to school and the holiday splurge comes back around.
You can see this pattern repeated each year.
Knowing how to recognize this trend is one of the most powerful – yet simple – tools an investor can have in their toolbox.
Let me show you why…
Here’s Weight Watchers’ price chart for the last six months…
Investors don’t like sequential declines in revenue, as you can see in that big step down on third quarter earnings.
You don’t want to hold shares of diet companies then.
But investors love sequential increases in revenue! Remember that for the months ahead with Weight Watchers.
These are the types of market patterns I’ve spent my career exploiting.
For years, my readers have feasted on a steady diet of Nutrisystem gains. These shares have a similar pattern. And we take advantage of their predictable ebbs and flows year in and year out.
In fact, there’s a way to book an average of nearly 42% on Weight Watchers shares – in a matter of months.
Most hedge funds can beat the markets only in down years. But you can outperform them consistently by adding some simple tools to your investing kit, like noticing the sawtooth pattern we saw earlier.
While some Americans close out the year feeling bloated, we make certain our portfolios are fat with profits by the time swimsuit season rolls around.
We do this by investing in the booming business of New Year’s resolutions… and dedicating ourselves to learning some simple tricks of the trade.