The Attack of the Shortsellers: Multilevel Marketing Stocks

Multilevel Marketing, Network Marketing, Direct Sales, Homebased Businesses, call it what you will, MLM's have been falling under the scrutiny of the Federal Trade Commission for years, to determine if they are pyramid or Ponzi schemes. Even short sellers have 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 however, some have had significant drops in their short interest during the last 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 recruited into their downline, which includes direct recruits, and their recruits' recruits. Downlines can be as much as seven to ten levels.

Here is a list of some of the major publicly traded MLM's, along with info 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. (HLF) This Los Angeles based company markets weight management, nutritional supplement, and personal care products in 63 countries throughout the world, through their MLM sales reps. Their price earnings ratio is 21, their PEG ratio is .81, and they pay 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. (AVP) This New York based company markets cosmetics, fragrances, skin care, and toiletries, along with various other products. They just reported a few days ago that their first-quarter profits nearly tripled. Their P/E is 39, with a forward P/E of 20. The 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 by 4.5%.

Pre-Paid Legal Services Inc. (PPD) This Oklahoma company markets legal expense plan memberships throughout the United States and Canada. Their P/E is 16, their P/S 1.7. The short ratio 6.5 days, and the short interest has dropped by 37.5%.

Tupperware Brands Corporation (TUP) This Orlando, Florida based company markets kitchen products, cosmetics and personal care products. Their P/E is 17.6, and their PEG is 1.55. They offer a fairly high yield of 3.1%. Sales ratio is 13, short interest has dropped by 30%.

Nu Skin Enterprises Inc. (NUS) This Provo, Utah based company markets personal care products and nutritional supplements. They have a P/E of 38, a PEG of 1.3, and a decent yield of 2.6%. Short ratio is 9.8 days, and the short interest as dropped 3.5%.

USANA Health Sciences Inc. (USNA) This Salt Lake City based company markets vitamins, minerals, skin products and personal care products. They have a P/E of 16.8, and a PEG of .87. A class action lawsuit was filed against the company last week. Days to cover 5.4, 178% increase in shares shorted of the current month's short interest compared to the previous month's short interest.

Mannatech Inc. (MTEX) This Texas based company markets nutritional supplements, skin care products, and weight-management products. The company's P/E is 12, and their PEG is .6, with a decent yield of 2.5%. The short ratio is a pretty high 21.6 and the short interest went up 4.2%. They just reported a 17% increase in quarterly earnings.

Author does not own any of the above.