Herbalife Shuns Critics; Focuses On EPS, Sales Growth
Nutritional supplements makerHerbalife ( HLF ) 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 Nasdaq.com.
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.