Ouch! I was prepared for some volatility when I invested in a skin-care company that relies on direct selling. But I really didn’t expect to get skinned alive so soon after I bought the stock. For those of us who consider ourselves value investors, however, suffering through what we hope are temporary setbacks is just part of the game.
Perhaps I should back up and explain. In mid July, I bought 148 shares of Nu Skin Enterprises (symbol NUS), which sells skin creams and other anti-aging products. At $67.80, the stock had already been cut in half since the start of the year and was selling at 11 times projected year-ahead earnings. The shares looked cheap. Unfortunately, they got much cheaper, falling to as low as $43.50 after Nu Skin reported disappointing second-quarter results. The stock closed at $48 on August 7.
Nu Skin, based in Provo, Utah, uses multilevel marketing to move its products. Like Herbalife (HLF), which uses a nearly identical business model, Nu Skin has suffered through and survived numerous investigations into its sales practices.
