All Things Boston  » Can Lightning Strike Twice for NutriSystem?

Can Lightning Strike Twice for NutriSystem?

Can Lightning Strike Twice for NutriSystem?


Posted by Hari Wibowo

On new year day, I wrote a piece of article to sell your 2005 winners. The lists include: Nutrisystem (NTRI), GeoGlobal Resources (GGR), Peerless Systems (PRLS), ViroPharma (VPHM) and Fieldpoint Petroleum (FPP).

I reasoned that we should sell these best performing stocks simply because history is not on their side. Most best performing stocks will lose value during the subsequent years. It is not the end of the year yet but the performance of these stocks during 2006 bears some striking resemblance except one:

NutriSystem (NTRI), up 75.7%

GeoGlobal Resources (GGR), down 40.0%

On new year day, I wrote a piece of article to sell your 2005 winners. The lists include: Nutrisystem (NTRI), GeoGlobal Resources (GGR), Peerless Systems (PRLS), ViroPharma (VPHM) and Fieldpoint Petroleum (FPP)....

Peerless Systems (PRLS), down 24.7%

ViroPharma (VPHM), down 39.5%

Fieldpoint Petroleum (FPP), down 4.3%

As I pointed out at the beginning of the year, the reason for selling was merely statistical one. So far this year, I am correct on most of this call except for this one stock, Nutrisystem (NTRI). What on earth is going on? Late Monday April 24th 2006, NutriSystem reported earnings of 60 cents or $ 22.3 Million for the first quarter of 2006. Most importantly, earning soars from 10 cents a year earlier and it tops analyst's estimate by 20 cents. For your information, that is 50% more profits than estimate. As a consequence, share rises 30% in early trading.

If you look at past best performers, they all experienced sickening drop on the subsequent year. Therefore, the question now is: Should you sell NutriSystem if you still own it? I have recommended selling your shares for the best performing company in 2005 on January 1st 2006. I still believe that statistically, NutriSystem is poised to fall. However, statistics is just that. Boston Red Sox won the World Series (finally), after 80 years of drought. Thus, nothing in this world is quite certain but the odd for NutriSystem is getting slimmer and slimmer.

If you own the other stocks mentioned above, it may be too late to sell, as they have already experienced quite a sizable drop. But, for NutriSystem share owners out there, if you bought it at the beginning of 2005, statistically, this may be a wonderful time to sell. But, please note that I have done no research whatsoever regarding the fundamental of these companies. I am merely expressing my opinions based on past statistics.

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