The increasing popularity of low-carb/high-protein diets—Atkins, South Beach, and the Zone— is leading to widespread changes in eating habits. Four leading advisors, Jon Markman, Jamie Dlugosch, Jim Collins, and Ian Wyatt offer investment ideas to play this trend. (For more information about these advisors, please click on their photos.)
Jon
Markman, in
his Stock
Tactics Advisor, says, "Micro-cap, MGP
Ingredients (MGPI NASDAQ)
is an innovative developer of grain-based ingredients to the processed food
industry. MGP recently developed two product lines that play into the
low-carb theme: W·One is a line of textured wheat proteins for vegetarian and
'meat-analog' products that reportedly offer advantages over rival soy-based
products, such as a more neutral flavor and more chewiness. Another is FiberStar
70, a modified wheat starch that acts as a 'fiber enhancer' to help
bakeries churn out low-carbohydrate breads. If you decide to add MGP to your
investment diet, be very careful as the small float and extremely thin trading
volume could make it hard to digest anything more than a small piece at a time."
Note: Although the stock has aleady reached Markhman's initial 'swing
trade' target, he feels it has the potential to trade up toward
$50 later in the year. He suggests using weakness as a entry
point.
"Our recommendation for
Sanderson Farms (SAFM NASDAQ)
has been based on the premise of buying growth at a value price," says
Jamie Dlugosch, editor ofThe Rational
Investor .
"Sanderson is a leading producer, processor, and marketer of
fresh and frozen chicken and other food items. Specifically, the attention being paid
to high protein diets, organic foods, and safety provide the potential for growth
at SAFM. As for valuation, the company is comfortable with analyst expectations of $3.50
in fiscal 2004. That gives the company a valuation of just over 11 times forward earnings.
We are comfortable buying up to a price of $45 and our target is $90. News of
mad cow disease led to a spike in the price of the stock and this move is
indicative of the potential in the poultry market. Indeed, SAFM is the type of
stock that can gather momentum in a fairly short amount of time depending on
circumstances in the market. We would like to be along for the ride if and when
that should happen."
"Cal-Maine Foods (CALM NASDAQ)
is engaged in the sale of shell eggs, sold to national and regional
supermarket changes," says Jim Collins, editor
ofOTC Insight.
"They use modern facilities that mechanically gather, clean, grade, and
package the eggs. This has generated significant cost savings as well as producing
a higher percentage of grade A eggs, which sell at higher prices. Their
specialty eggs include Eggoland’s Best, which are patented eggs that are believed to cause
no increase in serum cholesterol when eaten as part of a low-fat diet. Their
other special egg brand, Farmhouse, are produced by hens that are not caged and
are provided with a diet of natural grains. Shell-egg prices are a near
record high prices and in the latest quarter the firm reported record earnings of
$1.45 on a 58% increase in revenues. Results benefited from increased demand for
eggs in high-protein diets made popular by Atkins, and positive publicity about
the health benefits of eggs."
"eDiets.com (EDET OTC BB)
is a leading provider of on-line diet programs," says Ian
Wyatt, editor of Growth
Report.
"The company charges a flat subscription fee of $5 per week. At the
end of the second quarter, the company had 210,000 subscribers paying
for its services. The company currently offers its proprietary eDiets Plan, Atkins, and
The Zone. The firm has exclusive licensing agreements
with Atkins Nutritionals and ZonePerfect Nutrition. These well-known plans are attracting
new subscribers to eDiets, due to the strong brand-name recognition associated with these
two plans. Sales for the third quarter reached $11.1 million, a 46% increase
over the year ago quarter. We believe eDiets.com will deliver a small profit in
the fourth quarter, and is well positioned on the forefront of the on-line
dieting market. With the company profitable and trading at roughly 2-times sales, we find
the stock to be very attractive at current levels. We rate the stock a buy
with a target of $8."
