Why Herbalife Has Wilted in 2012

The year is nearing its end, and now's a good opportunity to look at what happened throughout 2012 to the stocks you follow. If you know the important things that a company achieved, as well as any challenges it failed to overcome, then you can make a better decision about whether it really deserves a spot in your portfolio.

Today, I'll look at Herbalife (NYSE: HLF  ) . The company has been one of the best performers since the 2009 lows, recovering from near-failure to set new all-time highs. But bearish investors aren't so sure about Herbalife's long-term prospects. Read on for more on what moved shares of Herbalife this year.

Stats on Herbalife

Year-to-date stock return

(8.3%)

Market cap

$5 billion

Revenue, past 12 months

$3.9 billion

Net Income, past 12 months

$465 million

1-year revenue growth

17.8%

1-year net income growth

18.1%

Dividend yield

2.6%

CAPS rating (out of 5)

***

Source: S&P Capital IQ.

What hurt Herbalife this year?
Herbalife sells nutritional supplements and weight-management products. With a focus on sports and targeted nutrition, the company has a fairly well-diversified product lineup that includes beauty products as well as promotional materials for potential new distributors.

Herbalife faces plenty of competition. Nutrisystem (NASDAQ: NTRI  ) has its own emphasis on custom-tailored meals for weight loss, while Weight Watchers International (NYSE: WTW  ) has extensively distributed food products in grocery stores as well as its own weight-loss programs. Among nutritional supplements, GNC Holdings (NYSE: GNC  ) has its popular GNC retail locations supporting sales. Yet for the most part, Herbalife has done a good job of outperforming its rivals and holding its own in the industry.

What truly smacked down the shares, though, was well-known hedge fund manager David Einhorn. Einhorn, who runs Greenlight Capital, asked a few questions on Herbalife's conference call, leading many investors to believe that he would end up selling Herbalife shares short. Given the impact that Einhorn has had in the past on companies including Green Mountain Coffee Roasters (NASDAQ: GMCR  ) and Lehman Brothers, the response from investors in sending Herbalife's stock plunging seemed justified.

But Herbalife fought back with share buybacks and positive financial results. Its most recent quarter led to record results, yet a recent downgrade from Argus Research added to the bearish argument on the stock. At this point, with 2012 having been a relative disappointment for Herbalife shares, you can expect battered investors to turn their attention toward a more hopeful outcome in 2013.

Will Einhorn bring down Herbalife?
The reason investors are scared about David Einhorn's interest in Herbalife is that he did a real number on Green Mountain. But investors looking to get into a stock, an Einhorn-led plunge can give you an opportunity. Find out more about Green Mountain's experience with the hedge fund manager in our premium research report. In it, you'll find everything you need to know about Green Mountain, including whether it's a buy at today's prices. Click here for instant access.

Click here to add Herbalife to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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Comments from our Foolish Readers

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  • Report this Comment On December 20, 2012, at 2:12 PM, wallstr33t wrote:

    Are you afraid to mention Ackmans name??

    Seems funny he is going to contribute all the monies to 2 charities instead of distributing it among his fund holders,

    He has messed up quite a bit this last year...plus I believe he owned a smaller fund that plummeted years ago.

    Then there is Cramer with his charitable fund talking up garbage stocks, now the street.com just got caught.

    Then there are us small investors ehat get scr@@ed because of these people.

    HLF isn't any different than tupperware, avon, mary kay, jewelery parties which I can't think of the name, miche purses.

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