JRjr33 Inc (JRJRQ)

[dancingblonde]

More from Groove VC on CVSL:

Replacing TZOO on the Focus List – CVSL

Since the removal of TZOO from our focus list, we have been surveying the landscape for stocks that better fit what we have traditionally sought to unearth for the Groove community – below the Wall Street radar micro cap opportunities that have enormous upside potential despite current issues causing them to be shunned, out of favor or in some cases, simply overlooked. We believe we have found an opportunity that can be a home run without even solving all the issues that have driven it down this low and it could realistically be a 10 bagger over the next 4-5 years if former Mary Kay Cosmetics CEO John Rochon successfully executes his stated plan. CVSL traded at it’s all time low earlier today ($1.07) and is currently very close to being a pariah – shunned because of sub par operational performance at recently acquired companies, shunned due to a poorly executed capital raise, shunned because it is in the direct selling business, shunned because the CEO of its largest division was just fired and shunned due to negative perceptions in the investment community driven by inordinately negative articles about CVSL.

The negatives for CVSL the last 6-9 months have been overwhelming and the stock has fallen 90% as a result. The current valuation reflects a total company value (adjusted for cash/debt) of around $23 million. This is a company that we believe to be on a $160 million 12 month run rate and one who could easily exceed those numbers to the upside with just a little boost in momentum among the true drivers of value for this company – its widespread and diverse 50,000 rep strong sales force. While we believe issues that recent negative articles have focused on not without merit, we also believe that these issues are more than fully reflected in the company’s valuation. While it may be another quarter before we see its bellwether acquisition (Longaberger) turn the corner and start growing again, we think that when it becomes apparent that Longaberger is back on a growth trajectory it will drive the stock substantially higher allowing for a potential “home run” (400% return) from existing levels on just that turn.

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