Avon Products, Inc. (AVP), Herbalife Ltd. (HLF): A Direct Approach In Emerging Markets

A Troubled Player

A third big player in the direct selling space is Herbalife Ltd. (NYSE:HLF). The company has recently been in the cross hairs of hedge funds, which has led to a government inquiry of the vitamin retailer. Although off from its highs, the shares haven’t done as poorly as one might expect of a company whose business is being reviewed by the government as a potential Ponzi scheme.

And, despite the negative press, the top and bottom lines and the dividend have all continued to grow. With a yield of about 2.7%, this is a high risk turnaround option. In fact, at this point, the company’s shares are more likely to trade on news than underlying performance. Note, however, that the company is experiencing solid growth in key markets like China (first quarter sales were up 24%), Brazil (up 19%) and Korea (up 16%).

Unfortunately, the downside risk here is fairly large. Most investors should stay on the sidelines until the clouds clear.

Direct Growth

Direct selling is an aspirational business model. It isn’t perfect, but it can help people reach their dreams of living a middle class lifestyle. Tupperware is probably the best positioned to benefit from growth in emerging markets right now. Though Avon Products, Inc. (NYSE:AVP) is working hard to catch up, it has some housecleaning to get done. That could give it upside potential for those willing to wait out a corporate revamp. Herbalife Ltd. (NYSE:HLF) is best avoided by all but the most aggressive investors.

The article A Direct Approach In Emerging Markets originally appeared on Fool.com and is written by Reuben Brewer.

Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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