3 Direct Selling Stocks Worth Buying

Difficult economic times can often lead to the start of some great businesses. Bill Gates founded Microsoft during the recession of 1975, for instance, while Hewlett-Packard was started in a humble garage during the Great Depression.

A poor economy often drives many budding entrepreneurs to pursue new ventures in order to supplement or replace their income. In today's economy, more and more people seem to be turning to direct selling businesses.

Direct selling, also known as multi-level or network marketing, is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of people they recruit. The salespeople will often sell their wares directly to friends, family and neighbors.

According to the Direct Selling Association, direct retail sales in the U.S. rose last year to a whopping $28.56 billion. The number of direct sellers in the U.S. has grown too, from 12.2 million in 2001 to 15.8 million in 2010.

More and more men are joining the direct sales force as they look for ways to generate income in a dismal job market. In 2008, only 13.6% of direct sellers were men. In 2010, that number jumped to 18.2%.

Expanding Around the Globe

The United States is not the only country holding Tupperware parties, either. Direct selling businesses are booming in the emerging markets thanks to a burgeoning middle class.

Here's a look at 3 direct selling companies currently thriving around the globe:

Herbalife Ltd. (HLF - Snapshot Report) is a global network marketing company that sells weight management, nutritional supplements, energy, sports & fitness products and personal care products. The company sells its products in 75 countries through a network of approximately 2.3 million "independent distributors".

Herbalife has experienced solid sales growth here in the U.S. as their hungry salespeople drum up business. But the real growth story is outside of the United States. Check out the year-to-date sales growth across different regions of the globe:

North America (excluding Mexico): 11%
Mexico: 43%
South and Central America: 47% (led by Brazil and Venezuela)
Europe, the Middle East and Africa: 19%
Asia Pacific (excluding China): 40% (led by South Korea and India)
China: 16%

Earnings estimates have been soaring over the last several months as Herbalife has delivered a string of positive earnings surprises. It is a Zacks #1 Rank (Strong Buy) stock.

Nu Skin Enterprises, Inc. (NUS - Snapshot Report) develops and distributes personal care products and nutritional supplements that are sold worldwide under the Nu Skin and Pharmanex brands.

Take a look at the sales growth by region:

North Asia: 8%
Greater China: 7%
South Asia/Pacific: 34%
Americas: -7% (U.S., Canada down, but Latin America up 17%)
Europe: 16%

The company has delivered an impressive 7 consecutive positive earnings surprises, prompting analysts to revise their earnings estimates higher. It is a Zacks #1 Rank (Strong Buy) stock.

Tupperware Brands Corporation (TUP - Snapshot Report) is a name synonymous with direct selling. Tupperware parties are still going strong here in America, but they are booming in the emerging markets.

Here is a breakdown of sales growth year-to-date by geographic region:

Europe: 11%
Asia Pacific: 27% (mostly India, Indonesia, Malaysia/Singapore, Korea and the Philippines)
North America: 6%
South America: 60% (mainly in Brazil and Venezuela)

Earnings estimates have been trending higher over the last several months as Tupperware has delivered 4 consecutive positive earnings surprises. It is currently a Zacks #3 Rank (Hold) stock. Shares trade at just 13x the 2011 Zacks Consensus Estimate.

The Bottom Line

Whether it's in the U.S. or the emerging markets, more and more people are turning to direct selling businesses to generate some additional cash. These 3 businesses have been thriving as a result.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

Read the full analyst report on TUP

Read the full analyst report on NUS

Read the full analyst report on HLF