Direct Selling Capital Advisors’ Stock Watch March 2021
For the first time since October 2020, direct selling stocks endured a difficult month in March. Each large cap stock within the tracking set either declined or underperformed and the Direct Selling Capital Advisors Selling Index (DSCI) fell 5.7 percent during the month, while the Dow Jones Industrial Average (DJIA) gained 6.6 percent. This is the first decline for the DSCI since October of last year and the first time since February 2020, when the DSCI began tracking this data. In spite of this new negative trend, the DSCI remains up 77.8 percent since February 2020, a massive lead on the DJIA, which gained only 29.8 percent. On a year-to-date basis, the index remains up 9.9 percent, compared to 7.8 percent for the DJIA.
This new weakness in the tracking sets in the month of March is likely due to altitude fatigue and profit taking, and can be primarily attributed to three leading performers during the pandemic: eXp World Holdings (NASDAQ: EXPI), Medifast, Inc. (NYSE: MED) and Tupperware Brands Corporation (NYSE: TUP). All three stocks saw significant declines during March, but remain among the top three performers in the tracking set since the DSCA began tracking.
Fourth quarter and year-end financial results were strong within the large cap tracking set. In Q4, the smallest year-over-year revenue growth among the seven companies within this set was 12.6 percent, and the smallest EPS growth was 15.2 percent. These seven companies grew, on average, 38 percent and earnings per share by 41.5 percent. It’s important to note that this EPS average excludes TUP and EXPI, which had negative or exceptionally low EPS during Q4 2019 and would artificially skew the calculation higher.
In 2020, six of the seven companies grew 6 percent in revenue year-over-year, with average revenue growth of 21 percent and average EPS growth of 25 percent, taking the same exclusions into consideration as Q4.
Large Cap Stocks
- Tupperware Brands Corporation (NYSE: TUP) fell 13.6 percent during the month, but remains one of the leaders with gains of 827 percent since February 28, 2020. TUP reported strong fourth quarter results, including revenue up 17.4 percent. Year-over-year comparisons, however, were behind analysts’ expectations, leading to a selloff of stock. Tupperware has stabilized its profitability and growth, setting the stage for additional growth in 2021, but having risen approximately 1,000 percent over the last year, the stock was due for a bit of pull back. In March, several of the companies’ executives purchased approximately $1.2 million in stock—a bullish sign.
- Nu Skin Enterprises, Inc. (NYSE: NUS) increased 3.3 percent over the month and now stands 123 percent above its levels when DSCA began tracking. Despite 28 percent year-over-year revenue growth, analysts and investors were expecting higher numbers, and so the company is working to slowly recoup losses experienced during February when Q4 financial results were announced. Like TUP, this pullback is to be expected after a year of significant gains.
- Herbalife Nutrition, Inc. (NYSE: HLF) traded significantly down in late February following the company’s earnings announcement. While the company has strong fourth quarter year-over-year revenue growth (15.6 percent), the stock traded lower due to missed analyst expectations at both the top and bottom line. The stock was virtually flat (-1.6 percent) in March, and has continued to trade in a sideways, consolidating pattern.
- Medifast, Inc. (NYSE: MED) has been a standout in the large cap tracking set, but declined 15.7 percent over the course of the month. It is still 166.5 percent higher than it was when DSCA tracking began. The company’s Q4 financial results beat estimates and included revenue that was up 55.3 percent year-over-year. Since then, the stock has traded sideways in a consolidating pattern and remains up 8.6 percent year-to-date.
- USANA Health Sciences, Inc. (NYSE: USNA) traded higher following its Q4 and full year 2020 financial results on February 9. The stock continued to trade higher and ultimately reached a 52-week high of $102.58 on March 4. It has traded in a bullish, sideways, consolidating pattern since then with its daily trading range tightening significantly. USNA is consistently trading in the upper 90s, well within striking distance of a new 52-week high.
- eXp World Holdings (NASDAQ: EXPI) reported preliminary fourth quarter results on March 2, including both record revenue (+122 percent year-over-year) and profitability, but the stock sank over the next several sessions. Over the course of March, the stock fell 24.6 percent but remains up 852.9 percent since DSCA began tracking 13 months ago. Year-to-date, EXPI remains up 44.3 percent and is the leading 2021 performer among larger stocks.
- Primerica, Inc. (NYSE: PRI) rose 4.7 percent in March and its year-to-date stock is up 10.7 percent. Since fall of last year, the stock has traded in a predictable, upward pattern. On April 2, the company announced it had achieved a single month Investment & Savings Products (ISP) sales record of more than $1 billion in March.
Small Cap Stocks
Nature’s Sunshine Products, Inc. (NASDAQ: NATR) stood out in March, rising 27.9 percent over the course of the month and is now 157 percent above its February 2020 closing price. The company reported financial results, which included a quarterly net sales increase of 11 percent year-over-year to a record $101.7 million on March 10, resulting in the stock moving aggressively higher on stock trade. The company also announced a special dividend of $1 per share and a $15 million share repurchase authorization. NATR reported $92 million in cash on hand at the end of the year. The dividend and repurchases will cost the company an expected $36 million.
All small cap stocks within the DSCA tracking set outperformed throughout March, and have year-to-date as well, with all providing positive returns for 2021 and all but two doing so in March.
Short Interest Data and Analyst Sentiment
Short interest in industry stocks began increasing toward the end of February. Industry wide days to cover fell to 2.4, the lowest level since a 1.5 was recorded in August of 2020. USNA fell to 6.9 days to cover, its lowest level since July of 2020, and PRI fell to 1.5 days to cover, its lowest level since DSCA began tracking this data in March of 2020. EXPI also saw short interest drop to 0.7 days to cover, its lowest levels since DSCA began tracking data.
The number of sell-side analysts maintaining “buy” and “hold” ratings on industry stocks remained flat, at approximately 97 percent. However, the number of analysts recommending “hold” as opposed to “buy” increased slightly. Analysts advising “sell” remained miniscule.
The first quarter of 2020 had not yet seen the impact that COVID-19 would have on the industry, and year-over-year comparisons will reflect the strong positive trends we have been seeing within the tracking set. As the industry enters the second quarter, the year-over-year comparison will become more difficult, since this is when many companies within the tracking set began to experience improved numbers.
“While we expect to see continued growth, we also expect the rates of growth to slow somewhat as we move forward throughout the year,” said Stuart Johnson, CEO of Direct Selling Capital Advisors.
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Direct Selling Capital Advisors (formerly Transformation Capital) provides this monthly market analysis article based on research and the TDSI index. The TDSI is a market capitalization weighted index of all domestic public direct selling companies with a market capitalization of at least $25 million.