Multilevel Marketing, Network Marketing, Direct Sales, Homebased Businesses, call it what you will, MLMs have been falling under the scrutiny of the Federal Trade Commission for years, to determine if they are pyramid or Ponzi schemes.
Short sellers even jumped on the bandwagon a few months ago, encouraging the FTC to adopt more restrictive rules for MLM companies. Some of these companies still have high short ratios and others have had a significant drop in their short interest over the past month. [By the way, a good site to check the short interest on a stock is ShortSqueeze.com.]
MLM companies operate by recruiting salespeople to sell a product and provide additional commissions based on the sales of people that are recruited into their downline. This includes direct recruits, and their recruits' recruits. There can be as many as seven to ten levels downline.
Here is a list of some of the major publicly traded MLMs, along with information about their short interest. Days to Cover, also known as the Short Ratio, is basically the number of days it would take the short sellers to cover their positions based on the average daily trading volume:
Herbalife Ltd. (NYSE:HLF) This Los Angeles based company markets weight management, nutritional supplement, and personal care products in 63 countries throughout the world, through its MLM sales reps. Its price earnings ratio is 21, its PEG ratio is .81, and it pays a small yield of .5%. The Short Ratio (days to cover) is .8, and the increase in shares shorted for the current month's short interest is up .38% compared to the previous month's short interest.
Avon Products Inc. (NYSE:AVP) This New York based company markets cosmetics, fragrances, skin care, and toiletries, along with various other products. A few days ago it reported that its first-quarter profits nearly tripled. It has a P/E is 39, with a forward P/E of 20. Its PEG is 2.1, and the company pays a yield of 1.9%. The short interest ratio is 2.2, and the short interest has dropped 4.5%.
Pre-Paid Legal Services Inc. (NYSE:PPD) This Oklahoma company markets legal expense plan memberships throughout the United States and Canada. Its P/E is 16, and has a P/S of 1.7. The short ratio is 6.5 days, and the short interest has dropped 37.5%.
Tupperware Brands Corporation (NYSE:TUP) This Orlando, Florida based company markets kitchen products, cosmetics and personal care products. Its P/E is 17.6, and it has a PEG of 1.55. It offers a fairly high yield of 3.1%. Its sales ratio is 13, and the short interest has dropped 30%.
Nu Skin Enterprises Inc. (NYSE:NUS) This Provo, Utah based company markets personal care products and nutritional supplements. It has a P/E of 38, a PEG of 1.3, and a decent yield of 2.6%. Its short ratio is 9.8 days, and the short interest has dropped 3.5%.
USANA Health Sciences Inc. (NYSE:USNA) This Salt Lake City based company markets vitamins, minerals, skin products and personal care products. It has a P/E of 16.8, and a PEG of .87. A class action lawsuit was filed against the company last week. The short ratio is 5.4, and it had a 178% increase in shares shorted of the current month's short interest compared to the previous month's short interest.
Mannatech Inc. (NASDAQ:MTEX) This Texas based company markets nutritional supplements, skin care products, and weight-management products. The company's P/E is 12, its PEG is .6, and it has a decent yield of 2.5%. The short ratio is a pretty high 21.6 and the short interest went up 4.2%. It just reported a 17% increase in quarterly earnings.
Disclosure: The author does not own any of the above.