Nutritional supplements makerHerbalife (
) has had its share of negative headlines in recent months, but
the stock is up more than 48% year-to-date and continues to set
up for a potential move higher.
It's been consolidating gains for just over six weeks, showing
good supporting action at the 10-week moving average.
The company sells vitamins and herbal supplements through a
network of distributors. It has a market capitalization of $5.1
billion and yields 2.5% annually.
Herbalife has been a publicly traded company since December
2004 and has one of the most consistent track records of growth
out there. Annual pretax margin and return on equity were near
peak levels in 2012, and the company shows double-digit earnings
and sales growth for 14 straight quarters. Earnings are due July
29 after the close.
Hedge fund manager Bill Ackman announced a $1 billion short
bet against Herbalife. During the week ended Dec. 21, shares
plunged 38% after Ackman accused the company of being a pyramid
scheme. But the stock has been in recovery mode ever since,
helped by strength in the broad market and some short covering.
As of June 14, short interest was 31 million shares, down from
37.3 million at the start of the year, according to
While Ackman has been a vocal critic of Herbalife, two
prominent hedge funds came to the company's defense earlier this
year. Dan Loeb's Third Point Capital disclosed an 8% stake in
Herbalife. Meanwhile, Carl Icahn announced a 13% stake. In March,
he raised his stake in the company to 15.6%.
Two high-quality funds with a solid track record of success
currently have a position in Herbalife: Wasatch Core Growth Fund
and Fidelity Magellan Fund.