YTB released their second quarter financials, the news, while not all bad, is -as you can expect, less than spectacular. The online travel agency that has been under heavy fire lately from the California Attorney General, and several former distributors, said that it lost $199,500 in the quarter that ended June 30th, compared to a profit of $1.67 million a year ago. Net loss for the six months ended June 30, 2008 was $3.7 million, or $0.04 per diluted share, compared to a net loss of $0.5 million, or $0.01 per diluted share, for the same period of 2007.  Not a good sign.

Some good news for YTB- they saw a significant increase in their revenue for last year. According to SEC filings, they had a revenue increase to $44.8 million which is a 37% percent increase over the $32.8 million a year earlier. The company also has some very loyal independent agents. Thousands of YTB agents met earlier this month at the company’s annual convention and defended the travel company as a legitimate operation that has empowered thousands to start and run their own businesses.

Scott Tomer, Chief Executive Officer of YTB, commented on the second quarter results, stating, “Our Company has experienced dramatic growth over the last 12 months, and we have witnessed an equally dramatic growth in the revenues achieved during that period. Like many rapidly growing companies, we have had to increase our spending to ensure that we have the proper infrastructure in place to support this growth, and to ensure that the quality of services that we provide does not suffer. We have worked to narrow our net loss on a sequential basis, and are committed to identifying areas for cost savings and improved efficiencies within our business.”

YTB has also finally released an official claim in regards to the California lawsuit, saying, “The complaint was filed after 18 months of dialogue, initiated by the company with the attorney general to discuss the implementation of a new California law’s potential effect on the company’s business model,” YTB said in its filing. “Throughout these discussions, which broadened over time, the company has consistently cooperated with the state’s information requests and provided detailed evidence in face-to-face meetings explaining how and why the company’s business model is in full compliance with California law. The parties recently came to a standstill and the Aug. 4 complaint is a result of this standstill. The company believes it has meritorious defenses to the claims, intends to advocate its position aggressively and believes it will ultimately prevail in the case.”

To decipher what that can mean, the State Attorney General was probably asking for information from YTB to disprove the allegations against them and our guess is that YTB was unable to provide sufficient info.  It is not a good sign at all when you get to a standstill with a high power government agency.  The government will make inquiries and requests for information to either support or disprove allegations against a company/person.  If you are unable (or unwilling) to provide such information or agree that you have acted in a way that could be or was detrimental to parties involved, you end up in a standstill.  It is never a wise decision to end up in a standstill with the government since they have nothing but time and unlimited resources to pursue their objectives.

Stay tuned, this one may be coming to end sooner than we all may expect.

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Jim Cramer, of CNBC’s MAD MONEY, celebrated the Third Anniversary of his show, last week with an in-depth look at stocks, especially stock to choose during what many expect to be the worst recession since the end of World War II. Cramer chose three stocks from the Direct Selling World, Avon (AVP), Herbalife (HLF), Tupperware (TUP), as some of his favorites.

Cramer explained that during a recession companies like those, and other involved in the direct sales world generally tend to do better. The reason? During recession when many companies downsize, people who are out of work, or who have taken a pay-cut, are looking for other means of income. These 3 companies have global exposure and are the most well known.

When people are choosing a second source of income, the 3 companies Cramer suggested, immediately come to mind due to their longevity, good reputation and availability worldwide. These companies and others like them generally profit from a weak dollar.

Cramer is especially fond of Tupperware because 85% of its sales come from overseas and the stock has gone up 6% since January. Cramer thinks this is a good buy because the stock has recently pulled back a bit, giving people a good entry point to purchase the stock. Cramer also likes Herbalife, the nutricutical company, whose stock has gone up $10 a share since November, but he warns against purchasing now and instead recommends waiting for a dip in the stock. Avon is also a good buy because like Tupperware a large portion of its sales come from overseas. 75% of Avon’s Sales come from international sales and the company will soon be expanding into Brazil and China.

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Direct Selling Stocks

Direct selling stocks, which are also known as multilevel marketing stocks and network marketing stocks, can be considered to be recession proof, because people turn to ways of generating extra income when times get tough. Direct selling companies operate by recruiting salespeople to sell their products. The salespeople receive additional commissions from the sales of people recruited in their downline.

Here is a list of some of the major publicly traded direct selling stocks.

Tupperware Brands Corporation (TUP) is an Orlando, Florida based company which markets kitchen products, cosmetics and personal care products. Their P/E is 19, and their PEG is 0.82. They offer a yield of 2.4%. (March 2007 - March 2008 +60%)

Herbalife Ltd. (HLF) is a Los Angeles based company which markets weight management, nutritional supplement, and personal care products in over 60 countries around the world, through their sales reps. Their price earnings ratio is 18, their PEG ratio is 1.18, and they pay a yield of 1.7%.  (March 2007 - March 2008 +22%)

Avon Products Inc. (AVP) is a New York based company which markets cosmetics, fragrances, skin care, and toiletry products, along with various other consumer products. Their P/E is 31, a PEG of 1.51, and the company pays a yield of 2.1%.  (March 2007 - March 2008 +8%)

Pre-Paid Legal Services Inc. (PPD) is an Oklahoma company which markets legal expense plan memberships throughout the United States and Canada. Their P/E is 12.  (March 2007 - March 2008 -7%)

Nu Skin Enterprises Inc. (NUS) is a Provo, Utah based company which markets personal care products and nutritional supplements. They have a P/E of 27, a PEG of 1.23, and a yield of 2.4%.  (March 2007 - March 2008 +20%)

USANA Health Sciences Inc. (USNA) is a Salt Lake City based company which markets vitamins, minerals, skin products and personal care products. They have a P/E of 11, and a PEG of 0.55.  (March 2007 - March 2008 +5%)

Mannatech Inc. (MTEX) is a Texas based company which markets nutritional supplements, skin care products, and weight-management products. The company’s P/E is 12, with a fairly high yield of 4.2%.  (March 2007 - March 2008 -50%)

Nature’s Sunshine Products Inc. (NATR.PK), which trades on the Pink Sheets, is a distributor of nutritional, herbal and personal care products. The stock has a P/E of 8.  (March 2007 - March 2008 -30%)

Author does not own any of the above.

By Fred Fuld at Stockerblog.com

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