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A global network marketing company that sells weight management, nutritional supplement and personal care products.
I entered HLF at a caps price of 49.80 and a PE ratio of 17.47. They are a cash flow generating machine producing over $205 million in the first six months fo the year. The valuation is good and analysts believe they will make $3.09 this year and $3.58 in 2012. They raised their dividend to $0.80 a year giving them a yield of 1.6% which isn't bad. They should also be able to raise it going forward.
How do you feel about HLF in the aftermath of the price drop, post-Einhorn?I took the opportunity to open a small position at price of $51.91 and a PE of 16.11 on 05/02/12 with a one- to two-year time frame in mind. I would add half again if the shares show further weakness over the near term (next few weeks) and half again after that in the event of a broad market pullback over the next 6-12 months before tying a knot on this one and letting it play out.Worth noting that short interest is just 5.11 percent of the float, so if Einhorn is short he doesn't seem to have a whole lot of company ... yet.Paps
The stock fell $14.30 to close at $56.30 after a great report. It fell as low as $45.55. It was a great buying opportunity. Why the drop? Well Einhorn asked three innocent questions at the conference call and the price crashed. It is just as possible he was about to go long the company. He went long on BBY that hasn't worked out well for him yet. The questions in my opinion were innocent ones that anyone might ask if they wanted to learn more about the company.There is some more bad news. It was recently disclosed that Herbalife settled with Minkow, an ex-felon, now back in prison to stop what would be expensive litigation in 2010. Minkow said they were, like he claimed about USNA, a pyramid scheme. He was also short the company at the time. Herbalife said for now on they would fight any such future accusations. He started his attacks in the Great recession when it was very hard for any company to do well. These things should be outlawed. Minkow is back in prison again for stock manipulation. It isn’t my first exposure to the felon. He attacked USNA too, a few years ago causing its price to crash. I checked out his charges realized they were just an attack from a man who was also shorting the stocks and that his claims were baseless. Both USNA and Herbalife are multi-level market companies, like Amway, like Shaklee. But they are legitimate businesses. He claimed they were pyramid schemes. I heard the same argument used to describe the stock market. Regardless Minkow is back in prison, though he did collect a $300,000 for a settlement to keep Herbalife from having to continue expensive litigation. Yes even felons can make a lot of money attacking companies and perhaps pressuring them to pay to stop senseless litigation.Was Minkow shorting the stock? Yes. He didn’t just attack Herbalife, he attacked many multi-level businesses including Medfast, who countered sued him. I hope Medfast wins their suite.http://www.cnbc.com/id/47266789I guess everyone thought Einhorn might go short, although he could have just as easily went long, he went long on BBY which is down now. But that is the world of investing. Nonsense brings it down, I buy on such news if the numbers are good and HFL numbers are great. I think Herbalife is a good one to buy. I am not too keen on the multi-level marketing business, but it is a legitimate business and some of these companies have long histories of success. I have made quite a bit of money on USNA when they were attacked by Minkow, simply by buying on the big dip which represented a great value. USNA is also falling in sympathy over the HLF news.It dips under $30, I will buy it again.What about Herbalife’s CEO being called the highest paid CEO at $89 million a year so far this year? Earnings keep going up, so I don’t care. Many of his options were issued when Herbalife was trading under $10 a share. I think investors are not going to care that he had a big year. Overall stock base compensation is one of the lowest I have seen with any publicly traded company. You should check INFN stock based compensation. So to me they are playing nice compared to so many others. INFN regularly takes about 12% of revenues while Herbalife takes less than 1% of revenues. So I think they are really shareholder friendly compared to so many others.Have they diluted shareholders stake? In 2007, they had a split adjusted 146.9 million shares. Today they have $122 million shares. And they just announced this: You Don’t Want Our Shares? We’ll Buy Them The Company announced they will buy back $427.9 million of its common stock, finishing out the remainder of its previously-authorized $1 billion stock repurchase plan. If they can buy back this stock before it goes back up, this in my opinion will represent great value.This report was their best in their 32 year history. You don’t have to be good to move the stock if you have a fanatical following. You can even be a convicted felon like Minkow. He caused many stocks to fall in value as he shorted the stocks and attacked them, He is back in prison for manipulating stock prices. He was sentenced to five years. http://articles.latimes.com/2011/sep/21/business/la-fi-barry-minkow-20110921I think they represent a great buy.February 21, 2012 4Q:2011 earnings’ highlights:** 4Q revenues were $884.569 million up from $738.356 million** Fiscal 2011 sales were $3.455 billion up from $2.734 billion** TTM revenues were $3.455 billion or $28.17 per share** 4Q earnings were $0.86 up from $0.69** Fiscal 2011 earnings were $3.30 up from $2.37 per share** Annual dividend $0.80** Cash $258.8 million: Debt $203.6 million** Cash flow $418.9 million up from $321 million** TTM cash flow was $418.9 million or $3.42 per share** Diluted share count 122.64 million** Trading range between February 21, 2012 and April 30, 2012 was $64 to $73: PE ratio range was 19.39 to 22.12: PS ratio range was 2.27 to 2.59: Cash flow yield range was 4.7% to 5.3% Dividend yield range was 1.1% to 1.25%April 30, 2012 1Q:2012 earnings’ highlights:** Revenues were $964.175 million up from $795.096 million** TTM revenues were $3.62 billion or $29.62 per share** Earnings were $0.88 up from $0.70** TTM Earnings were $3.48 per share** Annual dividend raised to $1.20** Diluted share count 122.373 million** Cash $305.861 million $231.8 million** Cash flow for the quarter $95.7 million up from $79.643 million** TTM cash flow was $434.96 million or $3.55 per share** Trading range between April 30, 2012 and the present May 4, 2012 was $45.55 to $59.28: PE ratio range was 13.08 to 17.03: PS ratio range was 1.54 to 2: Cash flow yield range was 6% to 7.8%: Dividend yield range was 2% to 2.6%** Special note: Stock price fell $14.30 to close at $56.30 per share
Einhorn made no mention of HLF which must make those that sold look pretty silly. He asked a few innocent questions that looked as if he was curious about how they make money and the shares crashed. He didn't mention HLF in his presentation today, so people bought back. Just a good example I wanted to keep on illogical movements. And for the record the last report was a good one, so I can' t wait until the next one. April 30th report send the stock down $56.30. The PE at its height was 22.12 So it closed at $56.30, PE ratio 16.18.Einhorn's presence made it fall as the herd sold in fear that he may suggest shorting it. hehehe The price bottomed at 42.15 PE ratio 12.11. No mention of the stock during his presentation, so it closed the day back up $49.51: PE ratio 14:23. Analysts believe they will make $0.96 the next quarter bringing TTM earnings to $3.56. They beat guidance and analysts estimation last quarter. I think they will do again.
Before anyone says anything about HLF, go try one of their protein smoothies. They are delicious. And THAT is why the stock is going up. By the by, they also have HLF stores to buy the smoothies (and other products) or to buy the product to make smoothies at home. The stores are a recent addition and changing the image of the company . . . I think . . . in that more people can try the stuff without thinking they are joining a cult. ( I have thrown or given away about $300 worth of protein drinks of other brands. HLF is so far superior. ) Note: I am a consumer and do NOT work for HLF.
Tom, What I don't care for in multi level marketing companies is, that they pass on too much commission to the upline. For e.g. with HLF, if someone is a donwline sales leader, any sales they generate through their own effort automatically accounts for huge commission to their upline. This means, they not only have one middleman between themselves and customers, but too many middlemen. Instead, why does HLF not try to have fewer "distributors" in the middle, offer discounts on their websites and encourage retailers to buy directly in bulk from them? Perhaps it works, but I feel that's a negative.
How do you feel now? It's down over half of what you went long at. Ackman is just continuing to expose what Einhorn discovered.
Ackman accused them of being a pyramid scheme. There are laws against pyramid schemes. USNA was accused of the same thing by ex-felon named Minkow. He was in prison because of financial fraud. AFter coming out of prison he decided he would make money shorting stocks and under covering fraud in companies. So he attacked USNA which caused the stock to fall big. I purchased big after the drop and I did very well. I think HLF Is giving people the same opportunity, perhaps even a better opportunity. But there is a caveat - What if in this case HLF is a pyramid scheme? I think that its not. There are very specific laws that govern what a pyramid scheme is and I feel sure that the SEC would have shut down HLF long before now if they believed it was. But HLF has been in business for 32 years. I look at their last earnings report and HLF sales grew 17% and earnings grew 20%. They pay a dividend to investors that is now yielding about 2.8%.Einhorn drove Green Mountain coffee to a 52 week low of $17.11. In less than a year it is back up to $42.52. Fear drives investors. If Donald Duck got on CNBC and called Walt Disney a pyramid scheme, I bet the stock would go down, depending on how well Mr. Duck spoke. heheheI think they are selling very cheap. Another high profile short on CNBC driving the stock price down and giving people like me an opportunity for good cash flow producing trades. Multi-level marketing companies have been accused of being pyramid schemes for a long as I can remember. I remember people saying the same thing about Shaklee when I was a teen. The high profile shorts are driving the prices down. High profile bulls do the same thing on CNBC. I try to make my own decisions. I think HLF looks really good. If the SEC shuts them down because they decide its a pyramid scheme, then the bulls lose. But they have had 32 years to shut them down, so I am guessing they won't. Over the last 12 months they have made $425 million in cash flow or $3.74 per share. This gives them a cash flow yield of 11.1%. They are cheap. Going on CNBC and accusing a multi-level marketing company as a pyramid scheme is a pretty easy way to make money shorting a stock. Ackman says he is in it for the long-term. Perhaps he is. And there is nothing wrong with sharing your thoughts on a company. But making an accusation that a company is a pyramid scheme got Minkow sued by Medfast. There are very specific rules about what constitutes a pyramid scheme. I believe they aren't and this is going to be another good entry point.When I first placed HLF on CAPS the PE was 17.47. Today the PE ratio is 8.71. I like them even better today. The above is what I think. What do you think? Do you think they are a scam? Or an opportunity? I think its another opportunity, just like USNA was when Minkow went after them and called them a pyramid scheme.Oh just a follow up note on Minkow. He is back in jail for securities fraud. http://articles.latimes.com/2011/jul/22/business/la-fi-minkow-sentencing-20110722
Tom, I am glad to hear that you disagree with Ackman. I own the stock, and need it to go back up. One point about HLF. HLF unlike USNA is registered in Cayman Islands. Is it now possible that they could be cooking their books? http://factsaboutherbalife.com/wp-content/uploads/2012/12/Who-wants-to-be-a-Millionaire.pdfSee page 12. They make a good point. HLF's baby formula is a 2B brand, but no one has ever heard of it.
you said " Herbalife’s CEO being called the highest paid CEO at $89 million a year so far this year.." ughhh Apple CEO made what?
Hi Huddaman,Thanks for the link. I will read it. I will also be watching Herbalife answer his accusations. It looks like Herbalife will answer Ackman on January 10, 2013. That should be interesting.http://www.bloomberg.com/news/2012-12-31/herbalife-rises-after-ackman-short-selling-spurs-buying.html
Hi Tom,I have no vested interest in the HLF situation but I am interested in the outcome of the HLF vs Ackman situation because I went through all the slides in Ackman's 343-slide presentation of his short thesis. I found it to be very compelling - have you managed to take a look at Ackman's presentation?Einhorn had to wait 6 years for his fraud-accusation of Allied Capital to be vindicated as the authorities were really slow to react, even in the face of insurmountable evidence. Einhorn's case with Allied Capital was documented in his book 'Fooling Some of the People All of the Time' - a great read, I would add.I have absolutely no insight into the HLF vs Ackman case, just watching from the bylines as a curious bystander. By the way, Ackman's presentation was really solid and not boring at all - pretty remarkable considering its 343-slides long. Cheers,Ser Jing
Ackman closes half of his short position.http://www.latimes.com/business/money/la-fi-mo-ackman-closes-some-of-his-herbalife-short-bet-20131003,0,2556395.storyAnd earnings and cash flow continues to grow.The government shutdown could negatively affect stocks as companies lay-off people relying on government checks to fund operations. This will take at least a week of the shutdown for the layoffs to start. The longer it takes for a solution, perhaps the lower the stock prices will go. Chances are they will reopen the government soon and no real correction will take place. I am just noting this.tom e
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