Very interesting Atkins diet comments (from TV show : Wall Street Week with Fortune magazine).
Wall Street Week with FORTUNE
Air date: June 4, 2004
McQuilling interview
COLVIN:It only happens once a year: FORTUNE names its new team of All-Star Analysts. Our program this time is all about them and their stock picks because the record shows they can make you money. The bitter truth about analysts, incredible as it seems, is that the vast majority would help investors most by taking a vow of silence. Last year, for example, the Nasdaq was up 50 percent, the S&P rose 26 percent, but the median Wall Street analyst's portfolio gained just 11 percent -- before commissions. In virtually every market subsector, listening to the analysts would have left you worse off than simply holding all the stocks in the group.
But the FORTUNE All-Star Analysts are in a different league. Their picks last year, which we reported to you, have once again beaten the market. The S&P was up 21 percent over the past 12 months, while the FORTUNE All-Stars' picks were up 32 percent on average.
We'll speak with two of this year's All-Stars in depth, and get the top picks of several more, including the company that's about to become America's largest managed-care provider; a gold play; and a computer maker that's way out of favor.
Arguably the star of the All-Stars is Andrew McQuilling of UBS, a rare three-peat on the list. He covers household products companies, and his picks last year once again trounced those of the average analyst in his sector.
COLVIN: Andrew, you have a reputation for liking stocks that everyone else seems to despise, and your current top pick is true to form. Weight Watchers is getting hammered by this Atkins diet mania. So how come you like it?
McQUILLING: That's pretty much the reason. 2003 was the year of the Atkins diet, and it really came out of nowhere in multiple forms, Atkins, the South Beach diet, the Zone diet.
COLVIN:All low-carb diets.
McQUILLING: All low-carb diets. This is a phenomenon that's happened before. In the last 30, 35 years, Weight Watchers has been impacted by four major diet events. The first was the Atkins diet in 1973.
COLVIN:Right. The same Atkins diet as today, but that's when it first appeared.
McQUILLING: And then disappeared for 30 years and has made a reappearance in 2003. In 1982, the Cambridge diet. And 1993 was the Fen-Phen diet supplement event. And so really this has happened before.
But Weight Watchers as a company is very unique. Since 1977 the company has compounded sales and profits at a 13 and 14 percent rate over 25 years since Jimmy Carter was president.
COLVIN:An incredible record over that length of time.
McQUILLING: Probably one of the only companies that's ever grown that quickly for such a long period of time. And the beauty of this one, we think they'll survive the low-carb frenzy in 2003 and 2004.
COLVIN: Now supposedly they have a big plan in the works for August, but it's kind of mysterious. Do you have any idea what they have in mind?
McQUILLING:All very hush-hush, so I'd have to speculate.
COLVIN:Yes.
McQUILLING: But what I have heard from franchisees and from other industry insiders is that they're very excited about the prospects for it, so I won't hazard a guess, but at least the people that are insiders and involved with the business are excited about the new diet's prospects.
COLVIN: And so your theory is that people will tire of the Atkins low-carb mania, as they have tired of all the other fads, and when they do, they'll come back to Weight Watchers. But why do you think they will tire of Atkins? It seems to be working for a lot of people.
McQUILLING: There is a lot of media. There's a lot of support right now for Atkins, and the food companies are now launching a number of low-carb food products. So the press will be on the side of the low-carb diet for another six months or so. What is encouraging, though, we found a data vendor that actually tracks the number of dieters, and the ...
COLVIN:In the United States.
McQUILLING: In the United States, and the specific diets that they're on. What we found very encouraging is that the number, which perhaps there were maybe 1 million low-carb dieters in late 2002, the number hit 10 million in August '03, and reached a high of 20, 21 million in January 2004. But since then, the numbers since January 30th have dropped nicely, down about 20, 25 percent, to about a 14, 15 million pace.
COLVIN: And do you think it's because people have achieved their goals? Or is it because they find that living on the Atkins diet is not something they want to do?
McQUILLING: That's the key thing. So we also, we did some in-depth consumer surveys of women and discovered some shocking statistics. In mid-February, 50 percent of all the women in America who were dieting were already on a low-carb diet. Of those dieters 73 percent couldn't sustain the diet for more than 8 to 12 weeks.
COLVIN:So you like it at today's low price.
McQUILLING:Yes, and the key event will be the launch of the new diet late August or early September.
COLVIN:Another company you cover is Gillette.
(boring ...)
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