Why Herbalife Is Poised to Underperform

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, nutritional-supplement maker Herbalife (NYSE: HLF  ) has received an underwhelming two-star ranking.

With that in mind, let's take a closer look at Herbalife and see what CAPS investors are saying about the stock right now.

Herbalife facts

Headquarters (founded)

Grand Cayman, the Cayman Islands (1980)

Market Cap

$3.2 billion

Industry

Personal products

Trailing-12-Month Revenue

$3.9 billion

Management

Chairman/CEO Michael Johnson
CFO John DeSimone

Return on Equity (average, past 3 years)

43.5%

Cash/Debt

$321.7 million / $503.4 million

Dividend Yield

4.4%

Competitors

Amway
GNC Holdings
(NYSE: GNC  )
Wal-Mart Stores
(NYSE: WMT  )

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 28% of the 572 members who have rated Herbalife believe the stock will underperform the S&P 500 going forward.

Just last week, one of those bears, Foolish colleague John Divine (TMFDivine), helped our community get caught up on the short opportunity:

Whenever SEC investigations about your company being a Ponzi scheme are in motion, I have to hop off the bull train. Fellow Fool Michael Lewis' first piece on HLF breaks down some of the problems in simple terms. It's an excellent piece get yourself briefed on if you want to get a quick lowdown.

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Read/Post Comments (2) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 31, 2012, at 1:53 PM, biz2befree wrote:

    So the SEC is investigating Herbalife? Are you saying it is a result of Ackman's presentation. I saw no proof this in Michael Lewis' article so I'd be interested in your source for this information. I have not heard of this investigation.

  • Report this Comment On December 31, 2012, at 2:02 PM, dhuddle wrote:

    @ Brian - Yes, go ahead and short it... and you will lose your shirt. I read Michael Lewis article and it was nothing more than a gushy recitation of what Ackman said. Ackman/Pershing had a 20 million share short position so making negative statements to drive down the price makes perfect sense. The Ackman/Pershing attack was brilliant and perfectly timed.

    I don't believe the SEC is investigating HLF and there is a difference between and Ponzi scheme and a Pyramid scheme. The SEC has investigated HLF several times and found no cause for action.

    One proof that you are wrong is that the person who is most knowledgeable about HLF bought $3 million at market in November at $44 per share. That is the COO who was previously the CFO. NO ONE knows more about the actual operations and finances of HLF. This wasn't stock given him by the company - this was his own money at MARKET. He isn't a super-rich guy, so he obviously thought $44 is a bargain. That is why I think the floor price is $44.

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