With the proliferation of media channels, its getting harder to get a customer’s attention, but Valassis Communications, Inc. (NYSE: VCI), Harte-Hanks, Inc. (NYSE: HHS) and As Seen On TV (OTC: ASTV) are three small cap stocks involved in some aspect of helping companies in their direct-response marketing or direct marketing endeavors. It should first be said that the definitions of direct-response marketing or direct marketing can be rather vague, but they would cover infomercials, mail order catalogues and other forms of media (either print or online) and it will generally involve a direct offer to purchase instead of being a brand building or brand reminding campaign. It should also be noted that the Direct Marketing Association (DMA) releases an annual Response Rate Report with last year’s noting that direct mail response rates have dropped nearly 25% over the past nine years, but that email had the highest ROI while the highesh response rate was produced by telemarketing. Meanwhile and while its easy to joke about infomercials, the US infomercial market is expected to reach the $252.3 billion level by 2015 because the long recession has more people staying at home – even if they are employed. With that in mind, here is a quick look at small cap direct-response marketing stocks Valassis Communications, Harte-Hanks and As Seen On TV:
Valassis Communications, Inc. (NYSE: VCI) Expects Revenue and Earnings Growth This Year
Valassis Communications calls itself a leading media and marketing services company delivering a world of value through its RedPlum media – the only blended media solution in the industry covering the mailbox, newspaper, online and in-store. Back in December, Valassis Communications issued an updated guidance that noted the actions the company has taken throughout 2012 have set the stage for both revenue and diluted EPS growth in 2013. However, Valassis Communications is assuming that there will be continued economic uncertainty, low-single-digit growth in US advertising spending and American consumers will continue to focus on savings. Valassis Communications is up 38.3% over the past year and it has a forward dividend of $1.24 for a dividend yield of 4.6%.
Harte-Hanks, Inc. (NYSE: HHS) Is Trying to Fix Its Direct Marketing Business
Harte-Hanks is a worldwide direct and targeted marketing company founded in 1923 and offers a variety of integrated, multichannel, data-driven solutions for top brands around the world. Harte-Hanks is also North America's largest owner, operator, and distributor of weekly shopper publications as The PennySaver and The Flyer have more than 1,100 separate editions and a print circulation of more than 13 million in California and Florida. However, investors should be aware that Harte-Hanks has had back-to-back earnings disappointments on both the top and bottom line in part due to a restructuring of its direct marketing business along with the impact from J.C. Penney Company, Inc. (NYSE: JCP) moving away from direct mail under Ron Johnson. Shoppers' performance was also disappointing with widespread declines - particularly in real estate. Nevertheless, Harte-Hanks’ Chairman pointed out that their restructuring is well underway in the direct marketing business while the Shoppers' business is expected to continue having a difficult year. Harte-Hanks is down about 30.3% over the past year, but the stock does have a forward dividend of $0.34 for a dividend yield of 5.5%. Otherwise, investors might want to sit on the sidelines and wait for Harte-Hanks to show some definite improvement.
As Seen On TV (OTC: ASTV) Is Poised for Takeoff
As Seen On TV’s wholly owned subsidiary TVGoods, Inc. is a Direct Response marketing organization created by Kevin Harrington, an infomercial pioneer. In fact, TVGoods, Inc.’s management team has been responsible for over 500 infomercial spots accounting for revenues in excess of $4 billion. However, As Seen On TV goes beyond just infomercials as it will advise clients about their Internet, retail, catalog, radio and print media strategies. However, As Seen On TV is down around 24.6% over the past year, but that could be about to change as late last year, the company announced that it would be acquiring eDiets.com Inc (NASDAQ: DIET). The deal makes sense for both companies as eDiets.com Inc uses direct-response marketing to sell its proprietary meal delivery program while Seen On TV’s expertise in that area and in infomercials in particular means it can take the company to the next level. eDiets.com has also generated $22 million in revenue over the past 12 months and the company has been streamlining its operations. That means the combined entity (Note: eDiets.com will be a subsidiary of As Seen On TV) will be well poised for growth.
The Bottom Line. Small cap investors might want to keep an eye on Harte-Hanks and wait for signs of a turn around, but Valassis Communications could be a good direct-response marketing stock while As Seen On TV would be a bet on the continued growth of infomercials and its acquisition of eDiets.com.