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.
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