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How to Play the Herbalife Roller Coaster

Fool analyst Austin Smith addresses the latest Herbalife controversy and offers his advice on how to play this investment.

Herbalife came under scrutiny after Bill Ackerman of Pershing Square publicly accused the company of running a pyramid scheme. Carl Icahn and other investors claim Herbalife is a legitimate multilevel marketing business. 

As an investment, Austin recommends avoiding Herbalife and other multilevel marketing companies altogether. He cites one statistic that 99% of salespeople in such companies lose money. In the long run, this is not sustainable as these people will eventually leave and word will get out that you can't make money with this firm. As for Herbalife, Austin believes that regardless of whether Ackerman wins, someone is going to lose big on this company.

Rather than invest in this volatile stock and risk losing your shirt, Austin suggests you grab some popcorn, pull up a comfortable chair and enjoy the show.

Herbalife may not be the safest place for your money today, but you can still kick 2013 off with a bang. I invite you to uncover the stock The Motley Fool's chief investment officer has called his "Top Stock for 2013." You can take a copy of this premium report, free for a limited time. Just click here to find out the name of this under-the-radar company before Wall Street catches up.

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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 January 18, 2013, at 10:10 PM, crcraig52 wrote:

    There is a lot more to Herbalife than meets the eye. Sure, their methods of marketing and sales have come under scrutiny numerous times over the last several years (at least since their IPO sometime around 2005) but the company has proven that their products are legitimate and are developed by top scientists and doctors. Herbalife has several Nobel Prizes laureates among their reseachers and continually leads the nutritional suppliment industry by years. Their nutritional centers are to be found all over the world, not just in localities identified as "prime markets".

    Those who fail to become successful with the company do so by their own failings. People will always find a way to waste their time and financial resources and then place the blame externally.

  • Report this Comment On January 20, 2013, at 11:50 PM, pushkin9 wrote:

    All these models proved unsustainable? Mary Kay has been in business since 1963, still doing well. Herbalife has been in business for 30 years... Is that not a long term?

    I guess it depends on what "long term" means. Are you thinking "when the Earth is swallowed by the Sun" long term? Then, yes, it will be unsustainable.

    Why dilute the Motley Fool brand with reports like this?

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