Thursday, October 04, 2007


Mushroom Clouded

If I had my way, during the next NTRI conference, I'd throw rabid pit bulls at the CEO, for what he just did to me. I'm taking man losses today, not that pussy intra-day scalp losses, like you fuckers.

How hard can his business be?

You would think with all the lazy fat fuckers in the world, a company that delivers food to them would thrive.

But no, not NTRI. They cite competitive challenges from some stupid drug that makes you shit your pants. Gee that's great fat people. Go ahead and lose some weight, while shitting your pants waiting for your second serving of meatloaf.

This whole debacle has me gun shy, afraid of putting my head in the guillotine. As you know, "The Fly" had this coming, with his chest thumping claims of grandeur.

Nonetheless, I still can't fathom how NTRI could drop the ball this badly. My hatfucking sources on NTRI insist this is a "blip" and that things should get back on track, during 2008.

Taking the lower end of NTRI's guidance of $2.48, at 15 x earnings, the stock should trade up to $37. If given a 22 multiple, like WTW, the price target is $54.

In short, the stock is a screaming buy down here. Whoop-dee- fucking-dooo.

As a result of this beat down, "The Fly" has decided to sell his RIMM trade from yesterday, instead of "riding it out" through earnings. However, it's worth noting, RIMM is still a top 5 position of mine, with a cost basis in the teens.

Aside from the "inferno of fun" I am playing in, I like the tone of today's market. I am enjoying gains in OEH, NOEC, BBY, LMT and RIMM. On a dip, I want to own BWLD, JCG and VMI.

Perhaps they hired Willie Randolph as CEO and forgot to send out a press release.
I gotta wonder, Fly, if NTRI's excuse were real, then why hasn't WTW been affected? I am long NTRI and WTW, by the way, and am scratching my head at their explanation.
real money contributor on NTRI

Try a 'New Year's Resolution' Trade on NutriSystem
By Bill Trent Contributor
10/4/2007 10:05 AM EDT

Less than a month after topping Fortune Magazine's list of the 100 fastest-growing companies, NutriSystem's (NTRI) growth rate came to a screeching halt.

The company announced Wednesday that while revenue growth will top 20% in the third quarter, it will be well below expectations, and earnings per share are expected to be between 62 cents and 66 cents -- barely budging from 63 cents last year and well below the 82-cent analyst consensus expectation.

With the shares selling off more than 20% in after-hours trading, investors have to figure out whether this stock's weight loss is permanent or whether, like many of its customers, it could be on a yo-yo.

To start, I'm going to lay my cards on the table and admit that I didn't see this coming. I thought investors were being a bit irrational after the second-quarter earnings report when they sold the shares following a strong report and slightly weak guidance (that has now been revised to really weak). So when considering anything I say about the name, remember that I have been dead wrong about it to date.

That said, after last night's after-hours selloff, the stock now trades for just more than 10 times its trailing 12-month free cash flow. From that multiple, I feel like I can earn an adequate return even if the company doesn't grow; all it needs to do is maintain its current levels of cash flow.

The problem is that the aforementioned growth has taken the cash flow off the charts. For example, if the growth had been steady, I might feel that free cash flow could retract to the $60 million the company posted in 2006, rather than the $108 million it gained in the last half of that year and the first half of 2007. While that would be a sharp cutback, the free cash flow yield would still offer support from which I would hope for growth.

But what if cash flow dropped to 2005 levels? It is surely possible that NutriSystem, a company more than 30 years old, could drop back to the levels seen two years ago, is it not? Well, if it is possible, it would be a big problem. In 2005, NutriSystem's free cash flow was only $12 million. Next to nothing. And I don't even want to think about 2004.

So, from my point of view, NutriSystem doesn't qualify as a sound investment opportunity right now, despite an apparently cheap valuation. It might, however, be worth a trade.

One guy who did get this story right was Citigroup's Gregory Badishkanian, who warned last month that sales may suffer in the short term as dieters try out GlaxoSmithKline's (GSK) new over-the-counter weight-loss drug, Alli. He also noted that the comparisons to last year's third quarter are difficult because that's when Dan Marino joined the company as spokesman. And of course, October is not known as the time to start a diet.

The tough comparisons are likely to continue, but Badishkanian doesn't expect dieters to enjoy the digestive side effects of taking Alli for very long. After we gorge ourselves this holiday season, we are likely to make the same New Year's resolutions we have often made in the past. And in each of the last three years, NutriSystem has enjoyed a strong rally from January through April.

Personally, I feel like I would benefit more from the product than from the stock at this point. If the shares are still down in late December, I may even attempt the seasonal trade, and by the time that is done, there may be a little more clarity about the sustainability of free cash flow.

In any case, making the resolution play will require a good deal of resolve about this volatile stock.
this market is gonna need a break ... GS just dropped 4
Broker - tough one. Keep your head up.

What I don't get is that management recently reiterated guidance, no? At a conference or something? Am I remembering right? Is there a mgmnt crisis at NTRI?

I don't have faith in these jokers. There are better places to put money.

As I strolled thru the frozen food section, I thought to myself, $11 bucks a day is kinda expensive in comparision to Weight Watchers or Lean Cuisine which I can buy for roughly $6-$8 bucks a day.

Cramer revealed what I believe to be the real issue -- their food all kinda tastes the same.
I was seduced by the 11x multiple, high growth rate, and attractive free cash flow generation and ignored a couple of classic red flags. I paid for it. This POS was almost 9% of my portfolio so it single handedly knocked about 3% off my YTD performance in a day. Fuck NTRI. I hope everyone wakes up skinny tomorrow.
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