Is Herbalife Ltd. (NYSE:HLF) worth buying? Some of the world’s smartest investors are buying in, and there might be a reason why you should to. Bill Ackman aside, the hedge fund world loves this stock. Curious who?
In the eyes of most investors, hedge funds are viewed as unimportant, outdated financial vehicles of yesteryear. While there are greater than 8000 funds in operation at the moment, we hone in on the aristocrats of this club, about 450 funds. It is widely believed that this group oversees the lion’s share of the smart money’s total asset base, and by keeping an eye on their highest performing investments, we have formulated a few investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 33 percentage points in 11 months (see the details here).
Equally as beneficial, optimistic insider trading sentiment is a second way to break down the investments you’re interested in. There are a number of incentives for a corporate insider to cut shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Many academic studies have demonstrated the market-beating potential of this method if you understand where to look (learn more here).
Consequently, it’s important to take a peek at the latest action surrounding Herbalife Ltd. (NYSE:HLF).
How have hedgies been trading Herbalife Ltd. (NYSE:HLF)?
At Q1’s end, a total of 37 of the hedge funds we track were bullish in this stock, a change of 23% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially.
According to our comprehensive database, Carl Icahn’s Icahn Capital LP had the biggest position in Herbalife Ltd. (NYSE:HLF), worth close to $765.9 million, comprising 3.6% of its total 13F portfolio. Sitting at the No. 2 spot is George Soros of Soros Fund Management, with a $227.5 million position; 2.5% of its 13F portfolio is allocated to the company. Other peers with similar optimism include Steven Richman’s East Side Capital (RR Partners), D. E. Shaw’s D E Shaw and Patrick McCormack’s Tiger Consumer Management.
Now, some big names have been driving this bullishness. Icahn Capital LP, managed by Carl Icahn, established the most outsized position in Herbalife Ltd. (NYSE:HLF). Icahn Capital LP had 765.9 million invested in the company at the end of the quarter. George Soros’s Soros Fund Management also initiated a $227.5 million position during the quarter. The other funds with new positions in the stock are Steven Richman’s East Side Capital (RR Partners), D. E. Shaw’s D E Shaw, and Patrick McCormack’s Tiger Consumer Management.
What do corporate executives and insiders think about Herbalife Ltd. (NYSE:HLF)?
Bullish insider trading is most useful when the company in focus has experienced transactions within the past six months. Over the latest six-month time period, Herbalife Ltd. (NYSE:HLF) has experienced 1 unique insiders buying, and zero insider sales (see the details of insider trades here).
Let’s also take a look at hedge fund and insider activity in other stocks similar to Herbalife Ltd. (NYSE:HLF). These stocks are Lifevantage Corporation (NASDAQ:LFVN), USANA Health Sciences, Inc. (NYSE:USNA), Auxilium Pharmaceuticals, Inc. (NASDAQ:AUXL), Prestige Brands Holdings, Inc. (NYSE:PBH), and Perrigo Company (NASDAQ:PRGO). This group of stocks are the members of the drug related products industry and their market caps are closest to HLF’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Lifevantage Corporation (NASDAQ:LFVN) | 1 | 1 | |
| USANA Health Sciences, Inc. (NYSE:USNA) | 13 | 0 | 12 |
| Auxilium Pharmaceuticals, Inc. (NASDAQ:AUXL) | 27 | 0 | 2 |
| Prestige Brands Holdings, Inc. (NYSE:PBH) | 23 | 0 | 5 |
| Perrigo Company (NASDAQ:PRGO) | 16 | 0 | 12 |
With the results demonstrated by the aforementioned tactics, everyday investors should always keep an eye on hedge fund and insider trading sentiment, and Herbalife Ltd. (NYSE:HLF) applies perfectly to this mantra.
