Are Weight Management Stocks A Good Investment?

#2 Weight Watchers International Inc. (NYSE:WTW)

– Hedge Funds with Long Positions (as of December 31): 24

– Value of Hedge Funds’ Holdings (as of December 31): $263.95 Million

The hedge fund sentiment towards Weight Watchers International Inc. (NYSE:WTW) increased noticeably during the fourth quarter, with the number of funds invested in the company climbing to 24 from 14 quarter-over-quarter. What’s more, the value of these funds’ equity investments in the company increased to $263.95 million from a mere $25.52 million during the quarter. The push into this stock and the underlying reasons behind it is likely why all four other stocks in this list witnessed declines in hedge fund ownership during the same quarter. This glowing sentiment was mainly driven by the announcement that media mogul Oprah Winfrey acquired a 10% stake in the weight loss company in October. Shares of Weight Watchers are up by 39% over the past year despite having lost a whopping 40% since the beginning of 2016. Nonetheless, Oprah Winfrey’s involvement (she is a member of the company’s Board of Directors) and investment in the diet company has not driven up sales just yet, but her active brand promotion through social channels may start to pay off in the foreseeable future. The company’s products and services involve meetings conducted by Weight Watchers and its franchisees; digital weight management products sold through websites, mobile sites and apps; products sold at the aforementioned meetings; as well as licensed products sold in retail channels. Weight Watchers International’s fiscal year 2015 total revenue was $1.16 billion, a decline from $1.48 billion in fiscal year 2014, and from $1.72 billion and $1.84 billion in the 2013 and 2012 fiscal years respectively. The decline in the number of members attending meetings and the average product sales per attendee of the meetings adversely impacted the company’s top-line results in fiscal year 2015. Marc Majzner’s Clearline Capital acquired a new stake of 1.62 million shares in Weight Watchers International Inc. (NYSE:WTW) during the December quarter.

#1 Herbalife Ltd. (NYSE:HLF)

Hedge Funds with Long Positions (as of December 31): 31

Value of Hedge Funds’ Holdings (as of December 31): $1.79 Billion

The number of smart money investors with long positions in Herbalife Ltd. (NYSE:HLF) dropped to 31 from 32 during the December quarter, whereas the value of those positions grew to $1.79 billion from $1.67 billion quarter-over-quarter. The 31 funds stockpiled slightly more than 36% of the company’s outstanding common stock on December 31. Herbalife is not a pure-play weight management company either, but is rather a nutrition company that develops and markets weight management, healthy meals and snacks, and personal care products, among other things. The company’s net sales for 2015 declined by 9.9% year-over-year to $4.47 billion, mainly due to the strengthening of the green buck against other currencies and a decline in sales volume. However, Herbalife’s net sales grew by 4.7% year-over-year in local currency. The company’s 2015 top-line results were positively impacted by price increases and a favorable change in country sales mix, which resulted in a higher share of sales volume being sold in markets with higher prices. Net income for 2015 grew to $339.1 million or $3.97 per diluted share from $308.7 million or $3.40 per diluted share reported for 2014. Shares of Herbalife have climbed by 53% over the past 12 months and are currently trading at 11.8-times expected earnings. Carl Icahn’s Icahn Capital LP owned 17.00 million shares of Herbalife Ltd. (NYSE:HLF) on December 31, 2015.

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