Forget Supplements – This Vitamin Store Just Bit The Dust

I told you last week that I’d have a piece for you on my latest “private equity victim.” I didn’t know then just how good this was going to get.

I released the full version of this piece, with a detailed recommendation, on February 6th for my Zenith Trading Circle members. (Subscribers can go here to get that recommendation now.) At that time, the company was still anticipating earnings, and I anticipated that it was headed for disaster.

I wrote, “[It] pays a $0.80 dividend, which gives it a ridiculous dividend yield of 8.87%. Look for the company to cut the dividend, which costs it roughly $40 million a year [it turns out the number is closer to $50 million – ed.], after another quarter or two of losses triggered by failure of its new strategic plan. A dividend cut will gut the stock even further.”

Yesterday, the company released abysmal earnings for Q4 2016 – same store sales were down 12%, revenue in the US and Canada fell by $41.1 million or 8% from $472.6 million to $513.7 million and even ecommerce sales dropped from 8.8% of the total to 11.4% of the total a year earlier (which is what happens when you raise on-line prices in a cut-throat pricing environment). Also – as I expected – the Board of Directors decided to suspend the company’s quarterly dividend in order to use free cash flow to reduce debt (which will save about $50 million a year but really won’t make a dent in the company’s $1.5 billion debt load).

The stock was down 10% on the news, and since it’s trading at about $7, it still has quite a bit of room to fall.

That means my Sure Money readers still have time to profit…


Why We’re In A Bubble – And Two Companies That Will Pop First

In case you’ve been asleep under a rock lately, let me catch you up: Markets are in the midst of an epic bubble that is being ignored by investors at their peril.

At 21x GAAP earnings (which are inflated by low interest rates, low corporate tax rates and sluggish wage growth), the S&P 500 is trading just below the 24x P/E it reached during the Internet Bubble. The S&P 500 rose 9.5% last year without profits increasing for the second year in a row. The index hasn’t seen a decline of 1% or more in 84 consecutive trading sessions, a feat last seen in 2006 and before that in 1996. If investing were really this easy, everyone would be rich.

But sadly, all of this is an illusion and it is going to end badly – very badly.

Especially for companies like these two.

Here’s why.


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