One fascinating aspect of a mechanical portfolio is that it will get you long companies that you often not even consider dabbling in. Such is the case right now, as Portfolio A1 has seen fit to drop Invitrogen (IVGN) and replace it with Herbalife (HLF), a company whose core business is in nutritional supplements and weight management products.
A year ago, the portfolio briefly held Herbalife competitor NBTY (NTY), so I should not be surprised to see this segment back in play. Last I heard, over 30% of Americans were classified as obese. An interesting cover story in the most recent Business Week, “Inside Drugmakers’ War on Fat,” chronicles the daunting problems facing companies whose efforts have focuses their efforts on weight loss drugs. The bottom line is that diet programs is a $33 billion dollar business, with no silver bullets in sight. Investment opportunities can follow either the hype cycles or the fundamentals, but there will always be long and short opportunities in this space. Herbalife reported a strong quarter on February 26th and raised guidance for 2008. Those interested in learning more are encouraged to review their Q4 2007 earnings conference call transcript.
Getting back to the portfolio as a whole, Portfolio A1 lost some ground on the benchmark S&P 500 index last week and now sports a net performance gain of 16.9% over the index, with a 5.8% cumulative gain vs. an 11.1% cumulative loss in the SPX.
There no other changes to the portfolio for the coming week.
A snapshot of Portfolio A1 is as follows: