by Will Ashworth | July 23, 2014 8:11 am
If you’re an owner of Herbalife stock, you can rest easy. Bill Ackman wasn’t even close.
Ackman appeared on CNBC on Monday with a promise that his Herbalife (HLF[1]) presentation the following day would in his words, “expose incredible fraud.”
Well, Tuesday’s presentation came and went with investors voting overwhelmingly in favor of Herbalife stock — it gained 26% Tuesday, closing at its highest level in six months — putting to rest any talk that the multi-level marketing company was in jeopardy of collapsing.
Heading into Bill Ackman’s presentation, the stakes were huge. The hedge fund manager bet $1 billion in 2012 against HLF stock. His disposition heading into Tuesday’s presentation was confidence bordering on cockiness. Herbalife CEO Michael Johnson stuck to heavily scripted press releases outlining the benefits of Herbalife’s community-based approach to health and wellness.
So, without spending a lot of time examining the minutiae of Bill Ackman’s presentation, let’s examine the highlight’s of Tuesday’s extravaganza:
While the research Bill Ackman has undertaken is first-rate (he says Pershing Square spent $50 million), the way in which he presented it was dull as dishwater. It was too darn long, bordering on four hours with the Q&A. Given the length, it’s hard to imagine any other outcome but a win for Herbalife stock — despite the actual content having some merit.
The problem for Ackman is that MLM companies have been under the microscope forever, and little has changed on the legal front. He can make the case that nutrition clubs are a sham (I believe is argument is a good one), but until the feds get involved and press charges, it doesn’t appear that anything he does is going to make a bit of difference.
But that doesn’t mean Bill Ackman is wrong.
Sure, he hasn’t landed the knockout punch to immediately collapse the price of Herbalife stock, but he has raised enough questions to keep the FTC and others searching for a smoking gun.
Herbalife’s 26% jump in its share price must be a real head scratcher for the veteran investor. People are buying Herbalife stock like crazy despite the fact half its revenue could be nothing but an illusion. In the days and weeks ahead, we’ll find out if there’s any truth to his accusations.
But right now, the Herbalife longs must be feeling healthy, wealthy and wise.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
Source URL: https://investorplace.com/2014/07/bill-ackman-herbalife-hlf-stock/
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