The Battle of Hedge Funds: Herbalife Ltd. (HLF)

Nu Skin could be a good buy if you think Herbalife is legit, because the stock sold off from $45 (now down to $41) after the whole Herbalife scandal broke. Nu Skin trades at a low PE (TTM) of 11.72 for a company that has grown its EPS by 37.9% (annually) over the past 5 years and pays out a 2.9% dividend yield. In 2010 Nu Skin made $2.18 a share, now that is up to $3.67 a share for 2012. One could assume that when the cloud over Herbalife goes away, so will the cloud over Nu Skin, which could push shares much higher.

Final Thoughts

Personally I don’t see Herbalife being a pyramid scheme. If the company was only around for a few years then I would onboard with Ackman as his claims would seem very legitimate. But there is no way Herbalife has fooled the FTC and SEC for 32 years. Even Nu Skin was investigated by the Feds and was found to not be a pyramid scheme. The Feds are rather bad at what they do and I hate the government in general, but over that long period of time someone would have noticed something was wrong if there was something to find. They have grown their revenue from $2.73 billion in 2010 to over $4 billion for 2012, so clearly something must be going right for them. I’m bullish on Herbalife and think the stock is undervalued, but we will just have to wait and see. Bill Ackman’s bet on J.C. Penney has yet to pay off, while Carl Icahn’s bet on Netflix and Chesapeake made him huge amounts of money. Don Loeb’s bet on Yahoo also paid out nicely. Bill is a good investor, but he should have taken his gains while he had the chance. Herbalife fumbled its chance to prove to the world it is a legit company, but the truth will come out once the SEC announces its investigation is closed because there is nothing to find.

The article The Battle of Hedge Funds originally appeared on Fool.com and is written by Callum Turcan.

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