DIET

[dnickers]

I think David should stick to his guns - the only rule he must/should follow is his 2% of capital rule - a 30% loss in any position at 6.66% of total equity.  I believe his logic for owning DIET is sound and selling here would be compromising his strategy.

[David Randolph]

i would understand if David sold based on the way diet is behaving. i'm trying to look at it long term. i do wish there was some volume. i'll wait for a catalyst to get this moving. i would think management is working on this.  soxguy

No, I'm not thinking of selling DIET, it doesn't matter what the share price does.

But as the stock goes down I'm getting less and less confident that I'm right. Of course it doesn't cross my mind to add more shares here, that could make my mistake cost even more.

The lesson I'm getting from this trade is: "If you think there will be a positive catalyst, wait and buy only about a week before that, no need to jump in months ahead of the news."

The lesson you (in general) should be getting from this trade is: «If a man is losing money in one stock, he's probably wrong. If he's making money in another, he's probably right on that one. So if I am to follow his advice, I'll probably go with the stock's where the market is saying "he's right"».

Anyway, the Stocks on Fire Portfolio is well diversified and I have the 6.66% money allocation rule that always keeps me out of trouble in terms of risk. Also, I should never lose more than 30% in one single holding to always respect the 2% money management rule (that rule says one should never allow to lose more than 2% of total equity in one single trade).

The issue that is making me hold this stock isn't technical or fundamental (so, probably this was a mistake), it is the expectation of a better website, since DIET is merging www.ediets.com and www.nutrio.com and the relaunch of the food delivery service. I'm a strong believer in this service, it just makes all the sense. If I lived in the US and wanted to make a diet, I could never cook my own meals (arghh, I hate cooking), and I would love a company that would bring my healthy meals to my house.

Management said it is working on these two big positive developments and it will release the news this quarter. I'll wait to see what they have to say. The problem is, perhaps when the positive news comes, the stock will make a great run, yes, to my break even point

It depends on the news. I hope I'll have enough vision to see what the future holds, given the decisions DIET's management takes.

I could also cut my loss and buy only after the news ... but then I would be a short term trader, since the news is so close now (and that wouldn't be nice for the 3 SOF Community). Also, my goal is to be a long term investor.

I'll keep on holding DIET.

[David Randolph]

There was a form 4 out just now saying Prides Capital, which owns 9,873,027 DIET shares or 40% of the company, bought 1,296 shares at $3.96.

Not much, but it goes to show that core long term investors aren't selling, they're adding to their holdings on the decline.

Hopefully this will provide a bit of a short term rally to DIET shares, it sure needs one.

[soxguy]

That's about a week's worth of volume already. i like it. soxguy

[jorgegr]

The ascending trendline drawn by Basonista is the clue,
if it holds, will go right up.
Believe other inside purchases may follow.  Will see

GLTA

[David Randolph]

Yes, there were more reports of insiders buying out today, but after all that has to do  with a board compensation plan. I guess the company buys shares (instead of issuing new shares) and gives them to board members as compensation.

Another interesting SEC file that was filed today was a file SC 13 G/A, saying someone called Gonzalez Alejandro owns 2,236,238 DIET shares, or 9.1% of the company.

So, Prides Capital and Gonzalez Alejandro combined own 49.7% of DIET.

I don't think this is much relevant information, but I've read somewhere Prides Capital made the substantial part of its investment at prices above $5 ... where did I read that, let me see ... Yes, I can't share the link (because this is a Java application), but confirmed the information. So, these very strong hands thought DIET was an attractive investment at above $5 a share. It doesn't mean they're right, but we're not alone on DIET (of course, someone always holds the shares, all this talk isn't much relevant).

What makes sense to me is that www.ediets.com changed like I haven't seen in a while, and now is showing a bit more of a commercial attitude.

Volume picked up today and the stock rose 7%. Perhaps the bottom was made at basonista's support line.

I've been thinking a lot about DIET's business and I think that, with a somewhat capable management team, it can't fail.

Over the latest conference call management said that over the long term, the meal delivery service will be the biggest revenue source for the company, following NTRI's footsteps (of course they didn't say exactly this). It was the food delivery service that turned NTRI from a $50 M - $100 M company to the current $2.39 B.

And the same will happen to DIET, I don't see much overlap or competition between the two services, because both sites have their communities. There's plenty of space for both companies. All DIET has to do is to follow NTRI's footsteps, and it will be at least a billion dollar company.

Now DIET sells written recipes. Soon it will delivery the food already made at people's homes, the right food adjusted to the person's needs.

The opportunity is too big and too important to be missed. After a false start the meal delivery service is about to be relaunched. 

I'll continue holding DIET.

[soxguy]

I'm not sure if it's relevant,but on yahoo there was an article stating that all the diet services were up midday. It seems there's a lot of people who can't push themselves away from the dinner table,or any table for that matter. What ever the reason,diet recovered today.It seems that one spike down to 3.20 yesterday cleared everything out. i saw the same thing happened with eght before it moved up. we shall see. soxguy

[David Randolph]

I'm not sure if it's relevant,but on yahoo there was an article stating that all the diet services were up midday. It seems there's a lot of people who can't push themselves away from the dinner table,or any table for that matter. What ever the reason,diet recovered today.It seems that one spike down to 3.20 yesterday cleared everything out. i saw the same thing happened with eght before it moved up. we shall see. soxguy

That's a great article soxguy, thanks for the info

Dieting Companies Rise After Survey Shows Many Americans Want to Lose Weight

I wasn't aware of this macro situation, even more fuel to DIET shares, because dieting can only go up from these very low levels.

[David Randolph]

My wife is talking here about an explanation to why people are not dieting so much anymore. Because they don't have time to follow diet plans, because they need to buy all the ingredients and prepare the meals.

For example, here at home, its me, 30 years old, and I like meat, fish, strong food. She likes to eat vegetables and fruits. My 3 year old son likes to eat with his hands ... and then we have a 4 month old daughter.

She already has to prepare three different meals for dinner, if she were making a diet she would need to cook for 1 or 1 and a half hours a day, and of course she has no patience (or time).

This is where the meal delivery service comes in. And this article explains why DIET 's financials aren't so sound as one could expect. People don't have time or patient to follow their advice. But if they sell their advice as already made food for dinner, delivered at people's houses, I'm sure it will take off like a rocket, just like it happened with NTRI.

[David Randolph]

As you can see on the graph below, eDiets (DIET) and Nutrisystem (NTRI) were very similar companies, in terms of market cap, until 2004:



From 2004 through the end of 2006, NTRI's market cap jumped 25 fold to $2.4 B, while DIET's market cap remained roughly the same around $80 M.

Why?

Because NTRI launched a very successful food delivery service to its community of people on diet and DIET still couldn't do it. You can compare both websites, you'll see the business models are very similar: www.nutrisystem.com and www.ediets.com (but ediets food delivery service is a bit hidden because it is far more expensive than NTRI's, because it is fresh food instead of those horrible tablets NTRI sells. It looks like people on diet still care a lot more about price instead of quality. If people want junk diet food, DIET must sell it to the public, because shareholders need to come first).

DIET's management needs to pull out a food delivery service as good as NTRI's to enhance shareholder value. I'm expecting this to happen because the opportunity is too large and too profitable to be missed by an inept management.

Management changed recently to a younger guy, Steve Rattner from Nutrio, and the man promised to relaunch the food delivery service and said that the company will make efforts to make the food delivery service the largest part of its business.

For example, in Q3 2006, eDiets Express had revenues of just $0.7 M, while NTRI had revenues of $155 M, almost all of it coming from its food delivery service.

DIET can also grow 25 times in just two or three years, it just needs to sell their costumers prepared meals at an affordable price, instead of text recipes.

I can lose 30 or 40 or even 50% holding DIET shares. But I can also make a 2,500% profit if everything goes right and DIET follows NTRI's footsteps.

I'll keep on holding DIET.

[David Randolph]

DIET is holding and building a base. I continue to expect good news from the www.ediets.com and www.nutrio.com merger and the relaunch of the food delivery service.

Will keep holding DIET.

[anvilring]

This is why DIET will go up  (1 Rating)     11-Jan-07 10:58 pm   

  There are many reasons. I will list just a few of them:
First thing first. Prides has been in this for aprox. 9 months. Kevin and Steve the two who run Prides are not stupid. They are both self made muti millionaires. They have a plan. First thing was to get the founder of the company out of there. That has been done. He did nothing but destroy wealth. The next thing was nutrio. For those who do not understand nutrio, look at the web site to get a better understanding. Nutrio prints CASH. This was a great deal for DIET to buy this company. There is a very low cost of acquiring new customers. The yr over yr growth potential is enormous. The next thing is the food introduction. There has been a lot of bitching about this, which is understandable. What you must understand is DIET is in test mode. The bouns is some revenue is being gernerated from this with little cost associated. They are looking at retention rates and tech. Infrastruture, and also price points. You can not launch a major food delivery without the proper layout, i.e prices, java platform menu selection. It is essential they pin point the proper food price to offer. This might take another 4-6 months, but it will be well worth it. Another issue is the sub. accounts. Everyone is panicing that they are falling off a cliff. People do not realize that this is a good thing. DIET was in a postion for years where they were acquiring customers at a loss. They are know out of these bad contracts. with i.e yahoo and AOL which was a disaster to say the least. DIET is now acquiring customers on a profitable basis. The subs will be down, but again, that is a good thing. In conclusion, DIET will eventually have so many people visiting the web site for the food it will bring subs in for a low cost. In the end, this will be a win win situation. DIET in the near future will have there food pricing and model down and also offer there diet plan at a reduced price. You will then see an absolute explosion to the upside in subs. There will obviously be an equillibrium with pricing. Two other contributing factors. The Licensing of DIETS software to fortune 500 companies. And also the ad revenue. Keep in mind. DIET spends a large amount of dollars on ad spending. The cost of advertising is declining fast which helps DIET a lot. Last thing a CEO should be coming soon. I look at this as a positive that it has taken this long. Prides in not just going to put some average JOE in there. Another positive factor DIET is a take over target. To start a diet business would cost a lot more then DIET mkt cap alone. Please do yur own DD. This is just my personal thoughts!!!
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[David Randolph]

It's nice to read a second favorable opinion on a stock we own, with basically the same bullish case, thanks for the article anviriling

Technically DIET is still working with basonista's ascending trendline. I'm expecting the stock to give a lot of trouble to any weak hands out there, because bottoms usually are extremely volatile and difficult to stand.

The fundamental case remains: DIET's workers are making a merger between www.ediets.com and www.nutrio.com and management is about to relaunch the meal delivery service, the thing that made Nutrisystem rise more than 20 fold in a few years.

I'll keep holding DIET.

[David Randolph]

Nothing new on DIET today. This isn't a cyclical business and the market potential is huge. Management just needs to start taking the right steps. They said they're doing that as I write and will release the news in Q1 2007.

The stock closed right at basonista's ascending trendline.

I'll keep holding whatever happens.

[Dracull]

David, I believe that fundamentals are good to support and uptrend or downtrend of a stock, but when I enter on a stock, I don't want to marry it, just to flirt an while to get my honey and then go out to another.

My point is that I think you value more the fundamental than the technical part of the trade, while, for me, the fundamental is a longterm relationship with a stock and the technical analyses is for short-term relationship.

At 3stocksonfire, what is the strategy? The main page of the site says "Our team scans and filters 11000 stocks everyday to come up with the best short term opportunities"......If one says "best short term opportunities", isn't that contrary to your affirmation of "I'll keep holding whatever happens"?

For me, best short term opportunity is going to where the market orders me go to, keep holding whatever happens is having a serious risk of going against the market today.

Don't take it wrong, I believe you guys are making a great work at finding great picks for all of us, but the issue seems to don't have a plan to bail out - this because the fundamentals kinda disrupts the technical part of the plan of entering at a support or breakout and selling at the resistance or breakdown.

D.