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Why Herbalife Has Wilted in 2012

By Dan Caplinger – Dec 12, 2012 at 6:03PM

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Let's look back at how the year went for this company.

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 (HLF -0.30%). 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


Market cap

$5 billion

Revenue, past 12 months

$3.9 billion

Net Income, past 12 months

$465 million

1-year revenue growth


1-year net income growth


Dividend yield


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 (NTRI) has its own emphasis on custom-tailored meals for weight loss, while Weight Watchers International (WW 3.07%) has extensively distributed food products in grocery stores as well as its own weight-loss programs. Among nutritional supplements, GNC Holdings (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 (GMCR.DL) 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.

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Fool contributor Dan Caplinger has no positions in the stocks mentioned above. The Motley Fool has options positions on Green Mountain Coffee Roasters. Motley Fool newsletter services recommend Green Mountain Coffee Roasters. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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