Time to Say Sayonara USANA (USNA)

Two years and two weeks later - with a triple digit gain under my belt - I'm saying goodbye to USANA Health Sciences, Inc. (NYSE:USNA). My hypothetical portfolio of stocks that I like and want to play with as a trade in my 'sandbox' portfolio (a model portfolio I've admittedly ignored too much) added USNA back on July 8th of 2010. Now, up 119%, I'm pulling the plug on the position.

Don't get me wrong. I like the company. Heck, I like USANA Health Sciences more now than I did two years ago. The nutrition and supplement company that sells its product through a network marketing system cranked up its top line from $517 million in 2010 to $648 million last year, and ramped up its bottom line from $45 million to $66 million in the same timeframe. I was only 'renting' USNA shares, however, fairly confident that the stock would reflect the company's underlying growth... and maybe a little extra. Things worked out that way (including the little extra), but I don't want to push my luck. Since my portfolio is judged - not officially, but effectively - I think the prudent thing to do here is walk away with my gain in hand.

The mere suggestion will undoubtedly ruffle some feathers. USNA has become a market favorite of late, caused by and causing the straight-line move from $31.60 at the end of last year to $86.96 now. How stupid can I be to get let go of a rising star? Yeah, well, I've been around the block a few more times than I care to admit, and I've seen the action USANA Health Sciences, Inc. is giving us right now too many times before. When things look this decidedly bullish, far more often than not it's the beginning of the end. [Just for the record, back when I picked it and nobody else knew anything about the company, that was also a 'crazy' decision.]

The critics will still argue that I should be judging the stock's merits based on their future growth. I don't entirely disagree. However, more gray hairs than I can count also forces me to conclude that the best-of scenario is already priced into the stock. USNA may only be trading at 14.6 times its forward looking earnings, and the company's got a few beats under its belt too; more are apt to be on the way. The stock is only a reflection of USANA Health Sciences' underlying results when the market wants it to be so, however, and I've got a nagging feeling the market's going to decide to disconnect the stock and the company soon.. It may happen when USANA announces earnings tomorrow, setting up a "buy the rumor sell the news" situation regardless of what the company says.

I know the whole "buy companies, not stocks" thing is also an argument against my approach, but I've got new for you.... stocks have been more of a reflection of investor opinion than a measure of corporate success for more than a decade now. It may not feel right or rational, but it is what it is.

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Bottom line? Sometimes you gotta cash in the board you have in the hand. That's what I'm doing with USANA.

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