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Set It and Forget It: Investing in Health and Fitness (TQLB, USNA, HLF, CELH, SMPL, NATR)

By: OTC

Secular growth themes are critical to long-term investment strategies because they depend on far-reaching trends that transcend the ups and downs of the short-term business cycle.

The health and fitness supplements market is growing strong and has all of the characteristics of a secular growth theme. According to Grand View Research, the global dietary supplements market size was estimated at over $123 billion in 2019 and is projected to expand at a CAGR of 8.2% over the next 7 years, driven by factors such as rising health concerns and changing lifestyles and dietary habits.

Research also points to a positive outlook for the sports nutrition market driven by a rise in the number of sports complexes and gymnasiums and an increase in the number of global sports events, both of which encourage athletes and consumers to focus on peak health and physical strength.

This makes sense. Curative health is expensive and scary. Preventative health is far less expensive and much more rewarding. As we learn more about how to get and stay healthy through diet, exercise, and a well-managed supplements program, the value of businesses that provide related products and services should ride a secular tailwind.

This has implications for many stocks in the space, including USANA Health Sciences Inc (NYSE: USNA), Herbalife Nutrition Ltd (NYSE: HLF), Torque Lifestyle Brands Inc (OTC US: TQLB), Celsius Holdings Inc (NASDAQ: CELH), The Simply Good Foods Company (NASDAQ: SMPL), and Nature’s Sunshine Products (NASDAQ: NATR).

We take a closer look at a few of these names below.

 

USANA Health Sciences Inc (NYSE: USNA) frames itself as a company that develops, manufactures, and sells science-based nutritional and personal care products.

The company offers USANA nutritional products that comprise essentials/CellSentials, such as vitamin and mineral supplements that provide a foundation of total body nutrition for various age groups; optimizers comprising targeted supplements that are designed to meet cardiovascular, skeletal/structural, and digestive health needs; and foods that include meal replacement shakes, snack bars, and other related products, which provide macro-nutrition.

USANA Health Sciences Inc (NYSE: USNA) just announced its brand-new USANA Active Nutrition product line. Launched to the public on June 15, 2021, in the United States, Canada, and Mexico, Active Nutrition features seven new products formulated to give customers the most positive and fulfilling health journey possible. From weight management to digestive health to energy and hydration, Active Nutrition has your body covered.

“Active Nutrition is one of USANA’s biggest launches, and I can’t wait for the public to see, firsthand, how amazing these products are,” says Dan Macuga, USANA’s chief communications and marketing officer. “Our vision for Active Nutrition is to move away from the specific goal of weight loss and instead focus on the way a healthy body feels—not just the way it looks. We are giving customers science-based, high-quality products, along with positive community support and helpful information to inspire them along the way. Our goal was to create one of the finest dedicated wellness systems accessible to anyone looking for a lifestyle change–our research and development team certainly delivered.”

Even with that news, the action hasn’t really heated up in the stock, with shares moving net sideways over the past week.

USANA Health Sciences Inc (NYSE: USNA) managed to rope in revenues totaling $308M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 15.5%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($257M against $151.5M).

 

Torque Lifestyle Brands Inc (OTCMKTS: TQLB) bills itself as a company focused on driving performance through acquisitions and by advancing original brands in the rapidly growing sports nutrition marketplace. TQLB develops, manufactures, and markets nutritional supplements for the sports industry in the United States. The company has a range of brands under its umbrella that create a diversified end-market focus, in terms of demographics, while embracing synergies across manufacturing and distribution strategies. The idea is to target non-overlapping consumer categories with products that have widely overlapping production costs, which is a strategy capable of producing wide profit margins as it matures.

The company’s current brands include American Metabolix (www.americanmetabolix.com), Core Natural Sciences (www.corenaturalsciences.com), and Storm Lifestyles (www.stormlifestyles.com). Core Natural Sciences and Storm Lifestyles are both new brand creations, while American Metabolix is an established leading brand already on pace for $1.5 million in 2021 sales.

Torque Lifestyle Brands Inc (OTCMKTS: TQLB) announced big news this morning on its plans to verticalize operations through a landmark JV with leading contract manufacturer Zero-Day Nutrition. According to the release, Torque will contribute capital to the JV to support machinery and other capital expenditures, while Zero Day will contribute manufacturing expertise and sales from its portfolio of current and prospective client brands – including rapidly growing, award-winning brands such as Glaxon – expected to be up to several million dollars annually.

Glaxon has won multiple industry awards in its first year of sales. It was nominated for Stack3d “Overall 2020 Brand of the Year”, and was named the winner of the Stack3d “Newcomer Brand of the Year”, the Priceplow “Breakout Brand of the Year”, and the Fitness Informant “Breakout Brand of the Year”.

“We are thrilled to announce this JV, vertically integrating Torque alongside an industry-leading manufacturing firm to improve the gross margin profile of the enterprise,” said Leonard K. Armenta Jr., President of Torque Lifestyle Brands. “In addition to realizing revenue from Zero Day’s client portfolio, we will manufacture products for our in-house brands – notably boosting profitability potential as we scale. I look forward to continued vertical integration in the quarters ahead as we strive to create value for our shareholders.”

Torque Lifestyle Brands Inc (OTCMKTS: TQLB) recently guided for 7-figure sales and noted that its sales were up over 60-70% on a month-over-month basis during the spring. The company’s latest JV news should significantly further ramp its outlook in both top-and bottom-line terms. Shares of TQLB have been grinding higher over the past two months and recently broke out above the stock’s 50-day moving average, which is generally viewed as a technical signal of an upward trend.

 

Celsius Holdings Inc (NASDAQ: CELH) touts itself as a global company with a proprietary, clinically proven formula for its master brand CELSIUS and all its sub-brands. A lifestyle fitness drink and a pioneer in the rapidly growing performance energy sector, CELSIUS has five beverage lines that each offer proprietary, functional, healthy-energy formulas clinically proven to offer significant health benefits to its users.

CELSIUS is sold nationally at Target, CVS, Walmart, GNC, Vitamin Shoppe, 7-Eleven, Dick’s Sporting Goods, The Fresh Market, Sprouts and other key regional retailers such as HEB, Publix, Winn-Dixie, Harris Teeter, Shaw’s and Food Lion. It is also available on Amazon, at fitness clubs, and in select micro-markets across the country.

Celsius Holdings Inc (NASDAQ: CELH) most recently announced the pricing of a public offering of 6,518,267 shares of common stock, consisting of 5,518,267 shares of common stock offered by certain selling stockholders of Celsius Holdings and 1,000,000 shares of common stock offered by Celsius Holdings at a public offering price of $62.50 per share. In addition, Celsius Holdings and certain Selling Stockholders have granted the underwriters a 30-day option to purchase up to 977,740 additional shares of common stock.

According to the company’s release, Celsius Holdings will not receive any proceeds from the sale of the shares by the Selling Stockholders and intends to use the net proceeds received by it from the offering for general corporate purposes. The offering is expected to close on June 14, 2021, subject to customary closing conditions.

In total, over the past five days, shares of the stock have dropped by roughly -12% on above-average trading volume. All in all, not a particularly friendly tape, but one that may ultimately present some new opportunities. Shares of the stock have powered higher over the past month, rallying roughly 17% in that time on strong overall action.

Celsius Holdings Inc (NASDAQ: CELH) generated sales of $50M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 40.3% on the top line. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($31.6M against $38.6M, respectively).

 

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