Fattening Your Wealth with Slender Fare

This nation is turning into Fat City. The percentage of overweight or obese adults in the U.S. has expanded from 45% in 1990 to 60% in 2004, reports the Centers for Disease Control and Prevention. As you fight to shed those extra pounds, consider other ways to invest in a healthy lifestyle -- ways that may not decrease your waistline one iota but may bulk up the value of your portfolio instead. Sad as it may be for plump Americans, the long-term outlook for many healthy-lifestyle stocks is fabulous.

Whether you're a dieter or an investor, success is no slam dunk. But because medical, demographic and political trends bode so well for healthy-lifestyle stocks, we focus here on a half-dozen of the biggest players.

NutriSystem (symbol NTRI, recent price $68) sells prepackaged meals directly to consumers by phone or through its Web site for about $280 a month. Customers expect to shed about a pound or two a week. The company, which in 2006 added 800,000 new customers, hopes to reach a largely untapped market as it rolls out a program for seniors. The new program focuses on the health and convenience of home-delivered meals rather than on improving appearance. Wall Street analysts predict that earnings will jump nearly 40% this year and that profits will grow 30% a year over the next three to five years. Despite those impressive numbers, the stock trades at just 22 times estimated 2007 earnings.

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Lehman Brothers analyst Michael Lasser describes Life Time Fitness (LTM, $52) as "a Lexus experience at a Toyota price." For about $60 a month, patrons of the health-club chain enjoy amenities usually reserved for facilities that charge twice that much: wood-paneled locker rooms with blow-dryers all around and a full complement of yoga, Pilates and spinning classes along with pools, a cafeacute; and enormous day-care centers with their own mini basketball courts. Minnesota and Texas are Life Time's primary markets, but the centers -- huge, Wal-Mart-size facilities, each with an average of 10,000 members -- are opening up in Georgia, the Phoenix and Salt Lake City areas, and other, mostly suburban markets. Analysts expect earnings to grow at an annualized 25% pace over the next three to five years.

Town Sports International (CLUB, $18) seeks to saturate its markets with a convenient and recognizable product. This winter, the company opened its 100th New York Sports Club. It currently operates 146 U.S. clubs with a total of 447,000 members in New York City, Boston, Washington, D.C., and Philadelphia (all with similar names -- Boston Sports Club, Washington Sports Club and so on). Revenues have grown consistently since the late '90s. Kathryn Thompson, at Avondale Partners in Nashville, expects earnings to rise 44% in 2007 and says she thinks the stock could reach $24 within the year. Town Sports is the smallest company among the six described here, with a stock-market value of $465 million.

When you work out, either at home or at your club, chances are you'll use a Nautilus machine or one of the company's other brands -- maybe even the signature Bowflex, marketed directly to late-night insomniacs. Nautilus (NLS, $15) is a turnaround story. The company suffered supply-chain snafus in 2005, and a knock-off of the Bowflex, which accounts for 44% of sales, hit the company hard and led to expensive patent litigation.

Thompson sees earnings per share growing at 20% to 30% a year over the next three years. She points to the company's debt-free balance sheet as justification for her stock-price target of $23 over the next 12 months.

Herbalife (HLF, $32), founded in 1980, is one of the world's largest multilevel marketing companies. A sales force of more than one million spans 62 countries, pushing a variety of weight-management, nutritional-supplement and personal-care products; some 80% of sales come from outside the U.S. The management team that took over in 2003 has turned the company around by finding new distribution areas and customers. The company will have a huge opportunity for growth if a pending license to sell in China is approved. Lasser sees earnings per share growing 15% to 20% a year over the next several years, and expects the stock to trade at $45 within the next year or so.

Perhaps the best-known name in weight control is Weight Watchers (WTW, $53). But Weight Watchers' stock is one of the least attractive now as the company tries to adjust its pricing to extract additional revenue from its members, who are fairly evenly divided between new customers and more-lucrative returnees who have used the program as many as five times before. The main problem is that the company has produced inconsistent results, exceeding investors' expectations one quarter but disappointing them the next. The stock, the most valuable among the six described here, with a market capitalization of $5.2 billion, has been just as inconsistent. A share price around the mid-to-high $40s would represent a better entry point for Weight Watchers -- whose long-term potential, like many of us, might well be supersized.