Atlas Shrugged?

In this week’s Goldman Guide we opined about some of the huge events that have occurred recently in our nation.

We believe they could have a long term detriment to our country, not necessarily from the actual outcomes themselves, but in the manner in which they were reached. By his own admission, Justice Kennedy admitted in his majority ruling in favor of gay marriage that, “the constitution had nothing to do with it”. Clearly if this trend continues, we could live in the dystopian world of Ayn Rand or George Orwell as our tagline references, no matter how you feel about the issues.

Atlas is also the Greek god featured in health club advertising and logos. There have been some hot IPO recently in the health and fitness space. Fitbit, Inc. (NYSE – FIT - NR) is up nearly 43% in two weeks and MINDBODY, Inc. (NASDAQ – MB - NR) is up nearly 17% in just a little over a week. Franchisee health club chain Planet Fitness is next in the U.S. stock market. The question is, will this trend continue? On a side note, we found this lighter side article from The Atlanticon how to stick to your gym membership.

http://www.theatlantic.com/business/archive/2015/06/how-to-make-a-gym-commitment-stick-economics/397250/

Finally, we thought, we would take a look at one of our prior small cap health and fitness stock picks. One we have panned or picked over the past two years or so is Nautilus, Inc.(NYSE – NLS - $21.72) is up over 185% since our initial 30-30 pick in May 2013. This is not an attempt to flex our muscles and brag, but to look at this stock based on its individual merit and the momentum of the space.

NLS 2-Year Chart, 200-Day EMA

(Source: www.otcmarkets.com)

The chart above illustrates the phenomenal two year run the stock has had, as well as 200-day EMA line in red. NLS is trading well above it. Top line revenue growth has been a huge part of the story, growing 12.8% from 2012 to 2013 and 20.8% from 2013 to 2014. This trend is set to continue with CAGR of 15% on average for 2015 and 2016 over 2014. Margins are also very impressive here. Gross margin of 52% versus industry average of 39%, and operating margin of 13% versus industry average of 6% indicate the Company is optimizing price point and running efficiently. Finally the Nautilus has zero debt as of the end of Q1 2015.

NLS is a well-established brand with a diverse product line. The stock should continue to be a solid play on the overall sector trend. We think $25 is within reach this year.

Have a safe and enjoyable Independence Day!

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