Transformation Capital: November Showed Direct Selling Stocks Outperforming Markets

November represented a strong period for direct selling stocks as a whole, as reflected in the Transformation Capital Direct Selling Index (TDSI), which rose an additional 20% over the course of the month. Direct selling stocks continue to outperform, driven by exceptional third quarter financial results related to uncommon strength in both domestic and European markets.

The performance of the domestic market points to a record domestic direct selling revenue for 2020. Of the multi-nationals reporting segmented information, Herbalife reported 55% year-over-year growth in North America; Nu Skin reported 81% growth in a segment which includes North America; Medifast, a primarily domestic company, reported 43% growth; Tupperware reported a growth of 42% and USANA reported 12%.

“The performance of direct selling stocks, as a group, has been something to watch over the last eight months,” says Stuart Johnson, CEO of Transformation Capital. “Six stocks amongst our tracking set have more than doubled over that period and four are up over 200% including gains of 1,080%, 497% and 458%.”

Large-cap Stocks

Standouts among large-cap stocks include Medifast, Inc. (NYSE: MED), which advanced an additional 45% during November, reporting revenue up nearly 43% year-over-year, with a gain of nearly 154% since the end of February; Primerica, Inc. (NYSE: PRI) which advanced more than 18% during November after a stagnant three months; and eXp World Holdings (NASDAQ: EXPI), which added 25.8% to its gains and now stands nearly 458% above February levels.

  • Tupperware Brands Corporation (NYSE: TUP) advanced an additional 6.1% and now stands 1,081% above its February 2020 closing price.
  • Nu Skin Enterprises (NYSE: NUS) rose 5.2% and now stands 115.3% above it’s February 2020 closing price. The company grew revenue 19% year-over-year.
  • Herbalife Nutrition, Inc. (NYSE: HLF) reported the largest sales quarter in the company’s history on November 5. HLF now stands 48% above its pre-pandemic levels. The company has more than $1 billion in cash on the balance sheet and, based on its track record, is expected to aggressively return value to shareholders, which would further buoy the stock price.
  • Medifast, Inc. (NYSE: MED) now stands 153.8% above its February 2020 closing price. The stock has steadily advanced and now sits in a consolidating pattern, above $200, after setting a 52-week high on November 30.
  • USANA Health Sciences, Inc. (NYSE: USNA) declined 0.6% in spite of reaching $298.5 million in third quarter revenue, well ahead of analyst consensus estimates of $280 million. EPS increased 32% and represented a record quarter for the company.
  • eXp World Holdings (NASDAQ: EXPI) rose an additional 25.8% and remains a top leader with the tracking set, posting gains of 458% since the end of February.
  • Primerica, Inc. (NYSE: PRI) advanced 18.5%, and revenue and EPS grew 9% and 23% year-over-year respectively, compared to analyst expectations of 4% and 4.6% respectively.

Small-Cap Stocks

The group as a whole performed well, with 5 of the 8 companies included posting gains of 10% or more. New Age, Inc.  (NASDAQ: NBEV) gained an additional 46%, buoyed by optimism surrounding its merger with ARIIX, while Nature’s Sunshine Products, Inc. (NASDAQ: NATR) rose 19% and has now advanced 51.6% during the pandemic period.

 

  • New Age, Inc. (NASDAQ: NBEV) rose 46.6% and now stands 69.8% above its February close. Management expects the recent merger with ARIIX to result in a combined entity with more than $500 million in annual revenue and to realize cost synergies of more than $20 million.
  • Sharing Services Global Corporation (OTCBB: SHRG), the parent company of Elepreneurs, advanced an additional 22.6% and now stands 500% above its February 2020 close.
  • Nature’s Sunshine Products, Inc. (NASDAQ: NATR) rose 19% and has now advanced 51.6% during the pandemic period. The company reported its highest revenue quarter in company history and a more than four-fold increase in EPS.

Looking Forward

“With a remarkable, to say the least, 2020 coming to end, we find ourselves taking stock of what has transpired and, more importantly, what to expect in the future,” says Stuart Johnson, CEO of Transformation Capital. “The question now becomes what’s next? We believe the market dynamics that have driven performance in the pandemic era have not changed and will not change quickly. As a result, we believe that at least the first half of 2021 will continue the current trend of strong growth across the majority of the industry.”