"Event-driven value investor"
viewed Herbalife (
)'s stock price drop due to
's $1 billion short announcement as an opportunity to buy a lot
of the company.
GuruFocus Real Time Picks
reports that Loeb has purchased 8.9 million shares of Herbalife,
an 8.24% stake in the company, on Jan. 3, 2012. He filed a 13G
with the SEC, meaning he does not have activist intentions.
Shares of Herbalife tumbled as low as 38% in December after
unveiled Pershing Square's short position in the company. On Dec.
20, Ackman lambasted Herbalife in a 342-slide presentation at a
Sohn Conference event in New York, calling it a "pyramid scheme"
and saying that it preys on the most vulnerable, low-come
segments of society. He has even set up a website dedicated to
unmasking its supposed business transgressions.
"Herbalife inflates the suggested retail price of its products
and overstates retail sales... recruiting worth is substantially
greater than the retail profit that they generate," Ackman said.
The doomed-to-fail company has a price target of zero, according
to Ackman, whose team spent a year researching it.
Irate Herbalife CEO Michael Johnson countered Ackman's claims on
CNBC on Nov. 19, saying Ackman was attempting to manipulate the
markets, and the company will discuss them further in their
investor conference tomorrow.
The stock's price has since returned to almost its
pre-presentation price, with an additional 9% lift on news of
Loeb's stake, to trade for $40.34 on Wednesday. Loeb's fund is up
21.2% through December, boosted by gains from Greek government
bonds, successes with his activist position in Yahoo! (
) and the resurgence of AIG (
HLF data by GuruFocus.com
In the past ten years, Herbalife has increased its revenue almost
every year, and produced a profit in nine out of the ten years.
It has produced free cash flow for the past ten years as well,
generating a record $419 million in 2011.
The company has been aggressive about repurchasing shares in
recent years. Since 2006, its shares outstanding declined from
143 million to 112 million.
Herbalife has a P/E of 10.3, P/B of 10.7 and P/S of 1.5,
according to its 10-year financials.
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