NTRI - What happened

I am sorry if anyone bought and watched the price plummet. As I will explain in a moment, please keep the faith.

First, let me also be clear. I own the stocks that I present in LIVEROCKET's portfolio. I put my own money where my mouth is. I know the pain all to owell when one of my choices goes down. And for anyone following my advice, I feel a heavy burden when my suggestons don't immediately pan out.

On the one hand, this is a good time to remind everyone about the hazards of picking one stock out of the LIVEROCKET portfolio and going with it. This is a portfolio which is hedging growth in several markets. As soon as you go with just one stock out of this portfolio, you open yourself up to a lot of risk.

That still doesn't make up for buying a stinker. Or is this a stinker? I don't think so - NTRI released some very good news, only to plummet from the $48 buy price to $41.xx.

NTRI pre-announced as follows.
Sales: $70M or 12% higher than expected
Earnings: $0.16 estimated and that's $0.01 below consensus expectations

Then they provided guidance for 2006 and for this quarter
Q1 revenues: ~$115M (versus $37M last year Q1) or up 200%
Customer base growing 170%
Q1 earnings: estimated at $0.35~$0.38 (versus $0.33 consensus)

Why would the market care about one penny this quarter when NTRI went on record that it expects to exceed by up to 5 pennies next quarter? I believe that it is partly the pre-earnings run up and partly because the market was shocked that sales growth was 'falling' from 600% to 200%. As an investor, I never expected that 600% number to remain: Q4 '04 was the last quarter before NTRI began selling on QVC or when their sales jumped from $8M to $37M.

Track the sales
Q4 '04 $8M
Q1 '05 $37M
Q2 '05 $41M
Q3 '05 $67M
Q4 '05 $70M
Q1 '06 est $115M

Analysts will also have to revise 2006 earnings expectations, currently at $1.22. If NTRI hits $0.35 this quarter and holds at that level, that's a 20% upside surprise for analysts. And that assumes flat sales. If they even grow beyond today, that's more upside surprise.
Forward P/E today ($1.22) 34
Forward P/E revised ($1.40) 30
Forward P/E with 10% upside ($1.54) 27

(Can they hit their target numbers? As we roll out of holiday season and Spring comes forward, expect lots of advertising around getting in shape for bikini season.)

This is a company with sales more than tripling, earnings doubling, but they are getting a P/E of ~30???? THIS IS A SCREAMING BUY OPPORTUNITY.

Keep the faith. As we get closer to next quarter, people will start to wake up to the doubling of earnings and get excited again.

Another Stock Buy - NTRI

We've been looking for a health stock and I found one - NutriSystem (NTRI)
115 shares at $48.05

First the numbers:
Revenue growth 2005 - ~742%
Earnings Growth - ~5,846%
Operating Margin - 15%
Return on Equity 40%

These are powerful figures.

Nutrisystem is very much like a Jenny Craig or a Weight Watchers but with a fundamental twist - they focus on portion control. I used NTRI for 3 months last year and I dropped 15 pounds. Their system works and I have kept that weight off.
What makes them especially unique are:
* Internet not face to face support: Jenny Craig and Weight watchers offer one-to-one counseling in stores and face to face. NTRI does it via the net - they outsourced the expensive storefornts and support staff.
* QVC: Unlike the others, they are a strong seller on QVC. As a result of starting this in 2005, sales have taken off like a rocket. In Q3 2005, they sold more in one day on QVC when they were the Special Of The Day than they had in the entire rest of the quarter.
* Targetting men: They are going after men and believe that the internet focus is more male friendly (men don't like the public and one-to-one counseling of the competition)
* Targetting seniors: they are also going to target seniors

I have been looking for a company that targets senior's health maintenance as well as a general healthcare company. I like this one for its growth prospects. I wouldn't be surprised if we started to see them on store shelves as well.

Buying stock today

The market swallowed Google's miss and the Fed rate hike a lot better than I expected.
We are buying 500 shares of ETrade @ $23.71

Mid-Week moves

Ok, it's time to prepare.

First, I continue to regret the GILD sale. They had great results and the market is already rewarding them.

Second, I am concerned about AKAM's softness. I suspect this has a lot to do with Yahoo/Google softness as well as no news, so lets continue to wait for earnings next week.

Third, SNDK is recovering nicely.

In general, I like the picks we have. We need a healthcare stock. Also, notice the continued WFMI and JBLU strength. Given the trend in the market, very few companies are getting rewarded for strong results. My strategy with these two is to wait until after earnings and then buy when they get clobbered (JBLU reports tomorrow).

Also, I want to buy ETrade (ET). If I am correct and money is flowing into the stock market from housing, then that means more trading. Online traders should benefit especially with ongoing consolidation. AMTD just bought TD Waterhouse and they will be busy digesting them. I expect ET to make some moves along similar lines. I will wait until the market decides how it will digest GOOG and the Fed rate increase.

In general, I do see the market yet again freaking out over GOOG. A great buy opportunity, I hope.

Current Portfolio

Unless otherwise indicated, we have removed all stops for now. Too much volatility this week:
* Tuesday the Fed meets
* UN Security Council on Iran
In this model, we are not trading aggressively to lock in every peak and then buy back at the trough. The purpose of this portfolio is to show that you - someone who is not actively trading - can still achieve market beating results.

Overall, I think money is rolling back into the US market from the housing market. We have $17K+ in cash which I see putting back into a few stocks.

Stock Shares Purchase Price
MRVL 200 49
JLG 263 38
JOYG 242 37.17
MDR 211 42.74
AKAM 603 19.89
STX 597 20.1
GRP 250 49.23
SNDK 175 70.02
Dividends $311.46
Cash $17,072
Total Value: $118,527