Nutrisystem Misunderstood?

Here is one of my favorite analyst quotes of this week, read more for my take:

"Fundamental to our call this morning is our belief that in general terms, NutriSystem is not properly understood by the Street, which includes a wide underestimation of the company's advertising potential in 2006," Block wrote in a research note. "We are raising our numbers to account for our belief that NutriSystem will spend at least $100 million in advertising in fiscal 2006."

Nutritsystem is not properly understood by the Street? The stock was up over 1,000% in 2005. It was the #1 performing stock of the year. I´d say alot of people on Wall Street are buying into the NutriSystem story. I wonder how high a stock must go to really be understood?

Incidentally, I did find NutriSystem when it was $1, but never bought it (still kicking myself). The reason why I passed on this stock is because the company´s weight loss methods were all the rage awhile back and then when people realized that the results were short-term the company drifted to bankruptcy. So it was difficult to understand why the company´s products would come back into vogue again. It´s like imagining a new low-carb craze in ten years from now and the Atkins brand again becoming a #1 diet brand. Who would predict that?

What I missed, of course, was the clever marketing by the new management team, who put a slight twist on a well-known weight loss product, and with that convinced a whole slew of newly overweight people to try a weight loss method that will probably not work long-term. I guess the lesson is that given the right circumstances you can fool people a second time and some of the best investments seem to come from re-branded past-hype stories (i.e. witness the renewed interest in Internet stocks).