CVSL: Buy The John Rochon Vision

May.26.14 | About: JRjr33, Inc. (JRJR)


Q1 2014 results show strategy is working. Top-line growth of 600% coupled with debt reduction make shares appealing.

CVSL has applied for listing on the NYSE, dramatically increasing the pool of potential buyers. More buyers equates to higher share prices.

Direct selling multiples are likely to expand in the post Ackman/Herbalife saga. Industry guidelines are likely to be clarified, improving the outlook for shares of direct selling companies.

CVSL (CVSL), headed by John Rochon, may well be the next big Direct Selling investment success.

CVSL is engaged in a process of acquiring and improving both "fallen angel" and newcomer companies in the micro enterprise/direct selling industry. Yes, the same industry which has been weathering a blistering attack by Bill Ackman, targeting Herbalife (NYSE:HLF) but dragging down multiples investors are willing to pay across the entire sector.

It is my belief that Ackman will ultimately be shown to have done the industry a favor, as there will be a "scrubbed clean model" in Herbalife, which other good companies can use as a standard in making whatever changes (if any) are determined by the various regulators to be required.

As the drama has unfolded over the past 16 months, John Rochon and company have quietly been adding companies to the CVSL stable. More and more well-known names are likely to soon follow the likes of Longaberger Basket and Agel Enterprises to the CVSL family of companies.

Efficiencies of scale and access to CVSL/Rochon management skill will make possible increased margins and opportunities for top-line growth across the spectrum of companies owned by CVSL. This is evidenced in the six-fold revenue growth in Q1 2014 vs. Q1 2013.

In my view, it is not so much the companies now owned by CVSL that drives my investment decision to own shares, but rather my belief and confidence in the pending "deal funnel".

The May 22 announcement by CVSL that a registration form s-1 has been filed with the SEC is significant. It is likewise significant that Cantor Fitzgerald is the book manager of the offering. When the shares begin trading on the NYSE, which should be less than three months from now, given the normal timeline on such offerings, CVSL will be eligible to attract large numbers of sophisticated investors who stay clear of pink sheet-listed equities.

Cantor is likely the very best underwriter for this type and scale of offering. The investment parameters of CVSL are changing rapidly and dramatically before our eyes. John Rochon is a seasoned professional in the direct selling industry, and he has surrounded himself with a star studded cast.

CVSL, while still not an investment for the faint-hearted, is in my view poised to grow top and bottom lines. This will of course ultimately be reflected in share price. For those able to accept volatility…establishing positions now, in advance of the Cantor-led offering, would appear to be a wise move.

Sentiment: Strong Buy

Disclosure: I am long CVSL, HLF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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