Hello to everyone
Want to reintroduce the topic of Herbalife (HLF) as mentioned some days ago in newspapers of 20 dicembe 2012 Bill Ackman's Crusade to Crush Herbalife.
The stocks is falling down on free fall, investors getting scary because of Ackman case with lawyers and consultants, but how long this story can sand up?
As the base of the case, Ackman sustain that is piramid scheme (ponzi scheme who recall) best managed in the world. But even if is piramid scheme and those of you who know the comapny and how is working, is nothing different with Avon or other businesses based on this kind of strategy.
Probably this bet of the Harvard Investor could hurt hard, really hard his reputation because I see really really difficult the company to suffer in long term.
Some info about the company: founded in 1980, went public in 86, the private from 2002 to 2004, after that we can monitor pretty good results over the last years. Revenue constantly growing, debt resizing, stable strong earnings. What surprise me strong ROE over the years and the capacity of the management.
Well, enter more into business, I will say is very very good model. Personally I tried once the company products in 2004 - went to their seminars and was curious to understand their business model. I understood soon how is working and what is saying Ackman thats true, that the sales are just based on the company sellers and necessity of new members on board, to mantain the revenues and finance the piramid. But the important factor here is human factor - every seller must to becoma a great psycholog , convincing others to buy their diet products. They have a fantastic marketing - people putting sticks of herbalife on their cars, having tshirt saying if you wanna loose weight just ask me and all sorts of seller - buyer relationship creation. Well now I dont wanna expand largely into their business model, but is working just fantastic. Especially in time of crisis when people looking for second job, especially on eastern europe markets and developing asian countries the business is just gonna continue, and for us - value investors, this cause between Ackman and Herbalife is giving a great opportunity to go long on the company.
From 19 december shares drop more as 39 %, with today P/e of 7.
I`m absolutely keeping eye on it, waiting the declaration of CEO and if is going to finish in court the case.
For risk takers will suggest shorting the stock waiting the next declaration, but I prefer to join from the upside part.
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