Be Wary of New Year Resolution Stocks

Each January ushers in a new round of hopeful resolutions. According to Proactive Change, 40 to 45 percent of American adults make at least one or more resolutions each year. The most popular resolutions involve weight loss and exercise.

The new year also brings in a new wave of stock picks. Considering the most popular resolutions, there are some equities that may tempt investors. However, they should keep in mind that resolutions often prove to be temporary. Proactive Change also estimates that after the first week of January, 25 percent of resolutions are broken. After one month, the number of failed resolutions jump to 36 percent.

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When it comes to weight management, there are three well-known companies for investors: NutriSystem (NASDAQ:NTRI), Weight Watchers International (NYSE:WTW) and Herbalife (NYSE:HLF). Although NutriSystem may be recognized for commercials starring former professional quarterbacks such as Dan Marino and Terry Bradshaw, shares have been slimming down since late 2009. Over the past three years, NutriSystem’s stock price has plunged 75 percent. Meanwhile, shares of Weight Watchers have surged 79 percent in the same time period, but are down 5 percent year-to-date.

The best performer in the weight management class in recent years has been Herbalife. However, this changed in May after one simple phone call. David Einhorn, founder of Greenlight Capital, showed up on Herbalife’s conference call asking questions about the company’s business model. The hedge fund manager is known for raising red flags on Lehman Brothers and Green Mountain Coffee Roasters (NASDAQ:GMCR), and his presence alone was enough to send shares 20 percent lower in a single day.

Although Einhorn has not disclosed a short position in Herbalife, another hedge fund giant made a large public bet against the company…