Everyone wants to feel and look good. Even as the troubles in Europe worsen and the U.S. unemployment rate remains high, people are willing to spend money if the result is feeling good about themselves. This trend has led to big gains for some of the stocks that provide such products and services.
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USANA Health Sciences (NYSE:USNA) develops and manufactures nutritional and personal care products that are sold through a direct marketing strategy. Their products range from weight management to vitamins to skin care. The wide range offers something for all age groups. Fundamentally, the stock is attractive, with a forward P/E ratio of 10.1 and a PEG ratio of 0.61. The earnings estimate from five analysts for 2012 is $3.67 per share. Based on a growth estimate of 16.5% in the future, the stock should trade at $60.50 for a PEG ratio of 1.0. This is a gain of 50% from the current price. Technically, the stock is just as strong as its fundamentals. Trading only 3% from a 52-week high and up over 30% for the year makes USNA a clear leader in the market.
SEE: Beware False Signals From The P/E Ratio
A company that sells similar products that USNA distributes is GNC Holdings (NYSE:GNC). The stock has had a similar run to USNA and is only a few percentage points from a new high. In 2012, the stock is up 34% and has recently been consolidating at the broad market turned lower. The stock trades with a PEG ratio of 0.94 and a forward P/E ratio of 16.3. The company also has a small annual dividend yield of 1.1%. The health and wellness retailer has the combination of a strong chart and attractive fundamentals.
A stock that was a market leader for years recently ran into a brick wall and is now down 30% from its all-time high set in March. Nu Skin Enterprises (NYSE:NUS) has been hit with concerns over their pyramid, direct marketing strategy. A company that uses a similar marketing approach, Herbalife (NYSE:HLF), has been a target of investors questioning their future sales approach. This has weighed on NUS and others in the space. The positive for NUS is that over 80% of their sales come from outside the U.S., where many of the concerns are rooted. Fundamentally, the stock is not as attractive as the first two companies mentioned, but with a forward P/E ratio of 12.6 and a PEG of 1.23 it is still a solid company. The one question mark is the chart and the heavy selling that has occurred in the last two months.
SEE: Business Plan: Marketing And Sales
Mannatech (Nasdaq:MTEX) is similar to USNA in that they offer nutritional and weight loss products through a network of independent associates. The stock has not had the same success as USNA, and it trades near an all-time low. Unlike the prior companies, MTEX is losing money to the tune of $6.52/share in the trailing twelve months. The combination of a bearish chart and losing money ends the conversation on MTEX quickly.
The Bottom Line
My view is that baby boomers are more into health than generations of the past and will likely spend their disposable income on products that allow them to look younger and healthier. The large baby boomer demographic makes the "looking good" sector a place to invest for the future.
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At the time of writing, Matthew McCall did not own shares in any of the companies mentioned in this article.