The press sometimes provides opportunities that would normally not occur in the equity markets, as they tend to exaggerate facts and news about publicly traded companies. Today’s media has the amazing ability to reach so many investors, as TV and internet have come a tremendously long way in the past decade. Potential investors are informed through multiple communication channels, as the speed of information is faster now than ever before. Investors looking to take advantage of the media and its ability to push stock prices both higher and lower can achieve great points of entry as well as good exit levels. Recent news developments regarding multi-level marketing firms and a public showdown between two billionaire hedge fund managers may provide a good opportunity in NATR.
Nature’s Sunshine Products (NASDAQ: NATR) operates in the personal products industry, a subset of the Consumer Staples sector. The company manufactures and distributes nutritional and personal care items, which include herbal products, vitamins, homeopathic products, oils and lotions, aloe vera gel, herbal shampoo, toothpaste, and skin cleanser. Nature’s Sunshine has a market capitalization of $240.51 million, and offers a dividend yield of 1.31%. In the company’s last earnings report that was announced on November 2nd of last year, net sales were $33.7 million, compared with $33.5 million in the same quarter a year ago, an increase of 0.5 percent. Operating income was $2.7 million, compared with $2.3 million in the same quarter a year ago, an increase of 15.0 percent. Overall the earnings report was slightly better than expectations, showing steady growth from the previous year. The stock reacted favorably post-earnings report until the worries about multi-level marketing firms in December began to ramp-up.
NATR is a smaller player in the MLM space, and uses this technique to sell health and wellness products. The stock got hammered as a by-blow of the Herbalife (NYSE: HLF) fight in December. On Dec. 18th the company’s stock price was at $15.44, and by Dec. 26th it was down more than 10% to $13.02. It’s since recovered but is going to be volatile as MLM firms get more media interest and bad press. The negative media exposure is expected to increase over the next few weeks as billionaire hedge fund manager Bill Ackerman publicly announced his short position on Herbalife. This investment was highlighted this past Friday on CNBC when Ackerman got into a heated exchange with hedge fund manager Carl Icahn.
Whether Icahn has a position in the stock is still unknown, but the two investors went toe-to-toe in one of the most entertaining moments in financial TV history. Ackerman has accused Herbalife of basically running a pyramid scheme, publicly stating that it will eventually be revealed and the company will go bankrupt. Whether this will occur is anyone’s guess, but the fight between the two hedge fund managers is expected to get a ton of press this week. This is expected to cause Herbalife and many of its similar users of MLM to drop, as folks will reconsider their investment in these companies. Some are expected to sell, as hedge fund titans such as Ackerman have the ability to move the stock. NATR is closely correlated with Herbalife, so the potential selloff may provide a good buying opportunity and a nice entry point in NATR.
The stock currently trades at $14.46, in between its 52-week range of $13.02 and $17.73. The company does not have any huge competitors in the industry; however, there are other similar companies. The company’s main competitors in the sector include Xenoport (NASDAQ: XNPT), market cap $365m, Depomed (NASDAQ: DEPO), market cap $348m, GTX Inc (NASDAQ: GTXI), market cap $305m, and Raptor Pharmaceutical (NASDAQ: RPTP), market cap $282m. NATR is well positioned in the sector and is expected to exceed growth expectations in 2013. That said, a buying opportunity might be available within the next few weeks.