Is Herbalife a Bad News Buy?

The hits keep on coming for this struggling stock. What should investors do?

Michael Douglass
Michael Douglass and Dave Williamson
Apr 17, 2014 at 6:30PM
Health Care

Herbalife (NYSE:HLF), the notorious battleground stock with dueling activist investors (Bill Ackman on the bear side, Carl Icahn on the bull team), has been embroiled in new controversy over the past few weeks, as the battle over whether it is a "pyramid scheme" has heated up. A series of agencies, including the Federal Trade Commission, the Federal Bureau of Investigation, and the Department of Justice, have recently opened investigations. More recently, those agencies were joined by New York Attorney General Eric Schneiderman and Illinois Attorney General Lisa Madigan, and, earlier this week, a shareholder filed a class action lawsuit claiming that he bought the stock at inflated prices because the company misinformed him by not disclosing that it is a pyramid scheme (whether or not that is true is, of course, up for debate).

Without knowing the evidence, it's hard to know what to do in the face of all of these probes and lawsuits. In this video, Motley Fool health care analysts David Williamson and Michael Douglass discuss why investors may want to remain safely on the sidelines until these issues are resolved.