Why I’m Buying Weight Watchers International, Inc. (WTW)

Next are weight-loss drugs. Most notable are Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)’ recently launched Belviq and VIVUS, Inc. (NASDAQ:VVUS)‘ Qsymia. These represent a threat, but again, I don’t think this is a winner-take-all proposition. Drugs are pricier, and, as Weight Watchers International, Inc. (NYSE:WTW), are only likely to grab a relatively small proportion of the overall market. What’d concern me most? Continued missteps from management on product launches, marketing, or another ill-timed share repurchase. Even so, at today’s prices, I believe the shares adequately account for these risks.

Last, Artal Group, a private equity firm, owns 44% of shares, and effectively controls the board. You might argue that last summer’s tender offer was a cash-out for its private equity owners, and it wouldn’t be unreasonable. Fortunately, at today’s prices, I believe that risk is again muted — Weight Watchers’ private equity owners also want full value for their shares.

The bottom line
What’s healthy for Weight Watchers’ customers can be healthy for your portfolio. A competitively advantaged business in a growing market can be had as if it’s in decline. I think the market’s due to add some meat to these shares’ bones.

The article Why I’m Buying Weight Watchers originally appeared on Fool.com.

Michael Olsen, CFA, has no position in any stocks mentioned. The Motley Fool has long January 2014 $50 calls on Herbalife.

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