It’s official: We’ve reached the last trading day of 2011. But as the band prepares to cue up “Auld Lang Syne” over the weekend, investors still have some unfinished business -- after all, just because the calendar is changing over doesn’t mean that traders’ portfolios are starting anew. And Mr. Market’s flat performance for the last year has left a lot to be desired.
That’s why it makes sense to look at some trends that could be taking shape in the first quarter of 2012. And believe it or not, one investible trend comes from New Year’s resolution stocks. Each year, consumers spend substantial amounts of money on self-improvement when the calendar changes over; with a relatively concentrated number of firms courting that cash, the revenue potential is relegated to a few distinct niches.
Today, we’ll look at five companies that are turning New Year’s resolutions into revenues in 2012.
Pfizer Every year, one of the most popular resolutions is to stop smoking -- that’s a change that drug giant Pfizer is cashing in on thanks to Chantix, the firm’s smoking cessation drug. While Chantix has only been out for a few years, the drug has already seen its sales balloon to $755 million in the most recent year. Now, with increased discretionary dollars flowing from health-conscious consumers, Pfizer could materially benefit from quitters.
To be sure, Chantix currently makes up a tiny fraction of Pfizer’s sales. But that could be due to change as new research unlinks some of the nastier side effects from one of the pharma giant’s newer offerings. Brand awareness is a critical part of selling a new drug and Pfizer has been spending more on marketing in the last year to get potential quitters interested in Chantix.
Pipeline concerns are a major issue for big pharma right now: when patents expire, so will revenue as consumers switch to bargain-priced generics. The fact that Chantix is under patent until 2018 bodes well for Pfizer. Shorter-term, a 4 per cent dividend yield bodes well for investors who don’t plan on holding their positions forever.
Weight Watchers Losing weight is another resolution that has perennial status on Americans’ lists. And more than ever, they’re turning to companies like Weight Watchers to do it. All told, the $4.1-billion (U.S.) weight loss firm saw its shares rally more than 49 per cent in 2011, an indication that the growth story in this stock is alive and well.
Weight Watchers is one of the most recognizable names in weight loss, with more than 1.8 million people attending the firm’s weekly meetings. Those meetings are translating into product sales as well -- the company licenses its point system to food makers and restaurants who benefit by marketing to WTW’s massive customer base. In turn, the ubiquity of Weight Watchers’ Points makes the system more attractive to potential customers who want on-the-go options for their diet.
Innovative marketing has been a key component of Weight Watchers’ growth strategy. By courting popular celebrities such as Jennifer Hudson and Charles Barkley, the firm is able to speak to more media savvy customers. The firm’s physical locations are one of its best assets, driving high customer stickiness and ease of access -- it’ll be important for those meetings to remain central to WTW’s strategy if it wants to sustain that growth.
Apollo Group “Get a better education” is another common resolution for Americans -- one of the costlier resolutions out there. By and large, for-profit education firms like Apollo Group have been taking advantage of new trends in education by providing class structures that suit working adults who want to get a degree. But Apollo stands above its peer group for a few reasons.
The most significant is Apollo’s accreditation status. Apollo owns the University of Phoenix, a school with more than 350,000 enrolled students worldwide. Unlike most of its for-profit rivals, University of Phoenix carries the same regional accreditation that’s held by more traditional public and nonprofit universities. That added credibility goes a long way both in attracting new students and ensuring that Apollo isn’t ensnared in the new federal student loan rules that are threatening the firm’s biggest rivals.
Financially, Apollo Group is in stellar shape with a massive net cash position on its balance sheet, and significant free cash flow generation capabilities. Don’t treat this stock like other for-profit schools in 2012.
Priceline.com As a group, Americans take the least vacation time in the developed world -- it should come as no surprise then that taking a trip has become a popular resolution in the past few years. That’s a choice that could bode well for Priceline.com in the New Year.
Online travel aggregator Priceline is one of the world’s booking Web sites, offering everything from airfare and hotel rooms to complete travel packages. The firm has seen breakneck, high-margin growth in the past several years, fuelled by expansion into Europe and Asia. If resolutions are to be believed, additional growth could come stateside in 2012. The firm will need to compel consumers to book their trips while they’re still in resolution mode if they want those sales to stick.
LinkedIn For the millions of Americans who put “Get a better job” on their New Year’s resolutions list, LinkedIn is bound to be a good resource. With more than 87 million users, LinkedIn is one of the most popular networking sites online.
And the firm generates the lion’s shares of its revenue by helping to place candidates at companies and by selling premium subscriptions to job seekers. That means that high employee turnover bodes well for LinkedIn’s bottom line. While recent IPOs (LinkedIn among them) have had a rough road in 2011, strong sales growth could restart investors’ honeymoon phase with this relatively new stock.
Jonas Elmerraji is a Senior Contributor to TheStreet.com
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