Medifast (NYSE:MED) is one of the leading players in one of the hottest industries in the U.S. today — weight management products. Specifically, MED delivers meal plans to customers that either have a medical condition where dietary restrictions are necessary (heart disease, diabetes, etc) or simply to people who want to eat healthier but don’t have the time or the knowledge to do that on their own.
Of course, there are plenty of heavy hitters (pardon the pun) in this space — Nutrisystem (NASDAQ:NTRI), Weight Watchers (NYSE:WTW) and Jenny Craig, to name a few. The stocks of these companies are hitting triple-digit returns year to date. Yet MED, likely the one you’ve heard least about, is leading the pack.
Tailwinds Helping MED Stock
There are a couple of key factors that turning this trend into a megatrend.
First, millennials have grown up in the back of a car, eating out. As they’ve grown older, they haven’t adopted the kitchen skills that were passed down a generation before.
Takeout food or fast food offered quality and variety at a decent price. It was fast and easy and could be even cheaper than you could cook the same meal at home.
Now, as young adults, they are tired of unhealthy fast foods are craving healthier choices. These meal services offer the perfect combination of nutritionally balanced meals that are convenient and easy to prepare.
A recent study revealed that nearly 75% of the produce people purchase at the grocery store goes unused before it is thrown away. People either buy too much and it spoils before they can use it, or they buy something and plans change and it sits until it’s no longer viable.
Along with this reality is the growth of the frozen food sales at grocery stores. And it’s likely that both these trends are linked.
It would also explain the powerful growth in weight management and health food plans.
The second trend here is baby boomers that are now reaching the ages where chronic diseases are starting to affect their lifestyle. Also, carrying a few extra pounds may not have been an issue when they were younger, but now it has a real effect on their quality of life.
Both these trends are only going to get stronger.
And bear in mind, this sector of the meals market is decidedly different than the Blue Apron Holdings Inc (NYSE:APRN) of the world. Those are food services for people who want to have a dining experience and are willing to pay a premium for the ingredients and portioning.
That is a sector that will struggle because it isn’t as tied to health and well being. It will wax and wane with the economy and is a more aspirational product than MED targets.
MED stock is up more than 133% year to date, and this run isn’t set to stop anytime soon. Q1 earnings, released in May, show earnings up 110%, revenue up nearly 40% — and it raised guidance for the rest of the year.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
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