Ophir Gottlieb | Jun 20, 2012 04:45AM ET
Nu Skin Enterprises, Inc. (NUS) is a global direct selling company with operations in 52 markets worldwide. The Company develops and distributes anti-aging personal care products and nutritional supplements under its Nu Skin and Pharmanex brands, respectively.
I found this stock using the real-time custom scan that searches for high vols relative to the short-term and long-term historical realized vol. But, there’s an interesting phenomenon here with a recent earnings move. Let’s start with the custom scan details:
Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20™ LTE 10
HV180™ - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 60
The goal with this scan is to identify short-term implied vol (IV30™) that is elevated both to the recent stock movement (HV20) and the long term trend in stock movement (HV180). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated IV30™ simply because earnings are approaching.
--- ANALYSIS ---
The NUS Charts Tab (six months) is included below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).
In that same article, we read some disturbing realities about HLF and NUS:
Per SEC filings, Herbalife bills itself as “a leading global nutrition company that sells weight management, nutritional supplements, energy, sports & fitness products and personal care products utilizing network marketing distribution.”
And Nu Skin bills itself as “a leading, global direct selling company that develops and distributes premium-quality, innovative personal care products and nutritional supplements.”
Let’s be honest, though. “Network marketing distribution” and “global direct selling” are nothing more than euphemisms for a pyramid scheme. The data confirms it, too.
The overwhelming majority of distributors at Herbalife (90%) and Nu Skin (95%) didn’t turn a profit in 2011. These figures are in line with exposés in Newsweek, USA Today and Britain’s The Times on other popular pyramid schemes.
The only ones that make money are those at the top. Like Herbalife’s CEO, Michael O. Johnson. He was the highest paid CEO last year, earning $89 million, according to Barron’s.
That doesn’t sound very good…
Throughput the 50% (ish) drop in NUS over less than a month, the news headlines were rather positive – increasing a share repurchase program.
Then, the price action got even more whacky. On 5-16-212, the stock rose from $40.22 to $46.46. The next day, it dropped back to $41.24. From what I gather by reading the news, there was anticipation that Einhorn would mention NUS (and HLF) as a short sale but didn’t (thus the stock rise). The stock then dropped the next day because... Well, I don’t really know why.
The vol side also has an interesting recent evolution. The implied reached an annual high on 5-1-5-2012, the day before the two-day pop drop wackiness. But since then, the IV30™ has dropped to 49.52% as the stock has found a quiet period. In fact, HV10™ is just 37.70%. Now that the 5-16/5-17 moves have rolled off of the HV20™, the implied is elevated to the near-term historical realized vol measures as well as the longer-term trend. Specifically:
IV30™: 49.52%
HV20™: 39.67%
HV180™: 41.10%
The 52 wk range in IV30™ is [23.82%, 66.79%], putting the current level in the 60th percentile.
Let's turn to the Skew Tab to examine the line-by-line and month-to-month vols.
--- SUMMARY --
Finally, let's look to the Options Tab (below).
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