HLF - Herbalife

[ZenaidaMacroura]

Maybe my imagination or did valiant suddenly turn down on ackman's perceived loss of street cred?

[TwoCitiesCapital]

Must be a very powerful feeling to see a stock move 20% directly after you give a presentation about it. If it moves the desired way, that is  ;) .

 

On a value investor forum, I'm always surprised to see anyone use market moves to justify anything considering most of us believe it as manipulated/flawed/emotional/irrational at one point or another.

 

He also addresses this in his presentation, Herbalife could be propping up it's stock by repurchasing at key times. I also wouldnt be  surprised to see others on Wall Street jumping on again to squeeze him once it was clear that it wasn't the bomb that it was supposed to be. I'm not saying this is the case, just that it's a possibility. I'm mostly uninterested in daily moves like this

ackman's mistakes today:

 

1) incoherent, unnecessarily long presentation. 3+ hours!

2) set exceedingly high expectations and failed to deliver

3) no exit strategy - he exhausted his credibility and doesnt have any left for the next presentation

 

you cant ever count ackman out, but today was pretty much another nail in *his* coffin, not herbalife's

 

Agreed. Was disappointed with today's presentation. He also could be a little more polite and bite his tongue when others are talking.  I still think that he's probably more right then wrong.

[Liberty]

Anyone else surprised someone of such intelligence would make such obvious mistakes as he did today?

 

1) incoherent, unnecessarily long presentation. 3+ hours!

2) set exceedingly high expectations and failed to deliver

3) no exit strategy - he exhausted his credibility and doesnt have any left for the next presentation

 

you cant ever count ackman out, but today was pretty much another nail in *his* coffin, not herbalife's

 

That's a very short-term view of the situation, mostly reacting to the stock price movement (if it was going the other way would it be said that he did a great job?). You know what they say about Mr. Market.

 

He's fighting a company that has devised a very complex and obfuscated system and will go to any lengths to protect the golden goose. There's no easy soundbytes to unravel it, sadly. Ackman is all about the details, and I think he overestimates how others are willing to follow him through hundreds of slides and connect lots of dots to understand something. He needs an editor to summarize the important stuff and then make the details available separately for those who want them.

 

But regardless of the stock price today, pyramids collapse when they get too big and there's a shock. If he's right about the fundamentals, that's what will matter in the end, like with any other investment, and people will point back to his various presentations as important steps. He could speed things up a lot by providing the shock himself, which is what he's been trying to do. We will find out over time if it worked (ongoing investigations, loss of confidence within the system, law of large numbers, etc). I don't think one day means too much fundamentals-wise, though of course HLF will claim that this means they're vindicated and that cynically promising riches to poor people in supposedly non-retail 'clubs' where new members pose as customers, do unpaid work and buy tons of expensive commodity products for their never-ending "training" isn't just a devious scam (can you imagine any other business operating like that?).

 

What's sad is that the media doesn't seem to be doing much investigative work anymore and just reprints press release or looks at which way the market is going to decide who's right. Too bad.

[siddharth18]

I think Ackman is being sincere about what he says but he seriously overestimated his ability to disabuse the world about Herbalife's business practice. However good his intentions might be, the fact that he stands to massively profit off it it seems more like he wants to shove change down the market's (and the world's) throat rather than help poor victims (as he claims). That comes off as arrogant and people don't like that. Hence they want to see HIM fail. Even if HLF is a pyramid scheme, it's just that there's more hate towards Ackman's arrogance than HLF victimizing the 3rd world.

 

http://blogs.wsj.com/moneybeat/2014/07/22/herbalife-on-ackmans-presentation-over-promised-under-delivered/

[topofeaturellc]

Its true that HLF is a pyramid scheme but the question is when does the pyramid get saturated? That's a good short thesis. That's not his thesis. 

 

Herbalife is still less than half of Amway on a revenue basis. No idea on # of "members"

 

I really do think HLF is a scam and a pyramid scheme, but that doesn't mean its a good short. Ackman thought he had the reputation to get the regulators onside and agree with him, and that has not yet worked out.  He basically needs that to happen to get paid.

[Liberty]

I think Ackman is being sincere about what he says but he seriously overestimated his ability to disabuse the world about Herbalife's business practice. However good his intentions might be, the fact that he stands to massively profit off it it seems more like he wants to shove change down the market's (and the world's) throat rather than help poor victims (as he claims). That comes off as arrogant and people don't like that. Hence they want to see HIM fail. Even if HLF is a pyramid scheme, it's just that there's more hate towards Ackman's arrogance than HLF victimizing the 3rd world.

 

http://blogs.wsj.com/moneybeat/2014/07/22/herbalife-on-ackmans-presentation-over-promised-under-delivered/

 

Ackman said he would donate any profits he made from HLF to charity.

 

But it could be a case of the double-standard applied to shorts as opposed to longs. When investors explain their long thesis, that's fine, but when they're short, they're the antichrist.

 

It's kind of ridiculous though to think that there aren't easier ways for Ackman to make money. It's obviously a high-conviction moral thing for him, not some random way he found to make a buck. He cried while talking about how unfair it is for the victims! He knew he would be personally attacked, would have to go through a zillion hours of research, and that this would take a long time to play out (he went through MBIA); why go through all that trouble when he's already a billionaire?

 

I think it's very possible that the perception is that he's arrogant and greedy. But I think he's doing it for the right reasons. I think his main sin is showing how smart he is. Buffett understood long ago that you've got to hide how smart you are most of the time and overcompensate with humility if you don't want people to dislike you.

[Picasso]

http://video.cnbc.com/gallery/?video=3000294712

 

Exactly how much money does Chapman manage?

 

His image on CNBC doesn't exactly give me the warm and fuzzies....

[TwoCitiesCapital]

 

I think it's very possible that the perception is that he's arrogant and greedy. But I think he's doing it for the right reasons. I think his main sin is showing how smart he is. Buffett understood long ago that you've got to hide how smart you are most of the time and overcompensate with humility if you don't want people to dislike you.

 

Agreed. Nothing is as simple as Buffett makes it sound. He's got a perception for business that others don't. Maybe he learned to hide his intelligence in that Dale Carnegie class that he credits a lot.

[peter1234]

Correct me if I am wrong, but I do think that his fund and his investors will gain from a successful short.

 

I think he will donate his personal 'cut' to charity.

;)

[ZenaidaMacroura]

I think both long and short do a fair bit of dramatization:

 

http://brontecapital.blogspot.com/2014/07/herbalife-clubs-another-experience.html

[writser]

Good summary from the Ackman presentation on Alphaville: link. They have been posting a lot of (more or less) nuanced updates on this saga along the way.

 

I think the whole Herbalife situation receives way too much attention, also on this forum. Lots of shouting from both sides while there are probably much 'easier' opportunities out there, both on the long and short side. As some of you pointed out it looks more like a clash of egos than an opportunity. Nevertheless I'm guilty myself of contributing to the noise :) . Just enjoying the drama from the sidelines though.

[peter1234]

Good summary from the Ackman presentation on Alphaville: link. They have been posting a lot of (more or less) nuanced updates on this saga along the way.

 

I think the whole Herbalife situation receives way too much attention, also on this forum. Lots of shouting from both sides while there are probably much 'easier' opportunities out there, both on the long and short side. As some of you pointed out it looks more like a clash of egos than an opportunity. Nevertheless I'm guilty myself of contributing to the noise :) . Just enjoying the drama from the sidelines though.

 

Thanks, this is a really good summary.

 

Looks like the thesis shifted from no customers/ inventory build up to customers being force fed shakes.

???

[Liberty]

Correct me if I am wrong, but I do think that his fund and his investors will gain from a successful short.

 

I think he will donate his personal 'cut' to charity.

;)

 

Yes, that's my understanding. And there's nothing wrong with that. If the company is eventually found to be an illegal pyramid scheme that scammed million of poor people, he should probably get a whistleblower award or something.

[Liberty]

Looks like the thesis shifted from no customers/ inventory build up to customers being force fed shakes.

???

 

I see it as still the same, it's just a precision on how the customers aren't customers in the way the word is normally used for any other business. They're almost all there for something else than the overpriced commodity products ("training" to join the get-rich-quick scheme, doing a favor to a family member who's "training"/selling the stuff, etc). The main thing is the recruiting, not the products, and that's what a pyramid scheme is.

[Liberty]

Good series of short videos of an interview by CNN with Ackman:

 

http://money.cnn.com/investing/bill-ackman-herbalife-exclusive/index.html

 

After a night to sleep on it:

 

http://www.thestreet.mobi/story/12783062/1/greenberg-ackman-and-herbalife--the-day-after.html

[Spekulatius]

Ackman claiming Icahn didn't do his due diligence when he bought HLF.

 

So far Icahn's back of the envelope investing beats Ackman's 300 page long nonsense. I am the only one that thinks that Ackman's prowess is overrated by the investment community? I think he is a gambler by nature mipore than an investor - big gains like GGP and others, but also epic failures like TGT, his first Gotham fund, BKS, JCP and most likely now HLF.

[Liberty]

Ackman claiming Icahn didn't do his due diligence when he bought HLF.

 

So far Icahn's back of the envelope investing beats Ackman's 300 page long nonsense. I am the only one that thinks that Ackman's prowess is overrated by the investment community? I think he is a gambler by nature mipore than an investor - big gains like GGP and others, but also epic failures like TGT, his first Gotham fund, BKS, JCP and most likely now HLF.

 

Hasn't he been doing over 20%/year overall since the early 2000s? (that's what I saw, anyway)

[lessthaniv]

Ackman lost me eons ago with his endorsements of Barry Minkow's research.

 

[Liberty]

Ackman lost me eons ago with his endorsements of Barry Minkow's research.

 

Can you elaborate? A google search didn't find much of value about this.

[lessthaniv]

That would take me a week. Liberty, I would recommend learning about Ackman. How he got his start. Who funded him. Who his friend were/are. History other campaigns...

 

 

 

 

[Liberty]

That would take me a week. Liberty, I would recommend learning about Ackman. How he got his start. Who funded him. Who his friend were/are. History other campaigns...

 

You don't have an elevator version?

 

What do you think about Leucadia funding him? You think Cumming and Steinberg have bad judgement?

[lessthaniv]

I value Seth Klarman's opinion even more and I believe he is also invested (or has been in the past).  But none of that sways my opinion. I don't like the money from Marty Peretz, Stienhardt, Ziff brothers ...

 

There is a reason the article you quoted above was from Herb Greenberg, imo.

[Liberty]

Well, to sway my opinion, I would need some facts, and so far I've seen a lot of insinuations about Ackman, which isn't surprising for a polarizing figure who isn't afraid to get in fights with powerful people, but what I could see and read from and about him over the past few years has led me to believe that he's a straight-shooter.

 

I'm open to re-evaluating with new facts.

[Phaceliacapital]

http://www.valuewalk.com/2014/07/pershing-square-performance/

 

Activist hedge fund Pershing Square leads the top of HSBC’s list of hedge fund performers year to date, up nearly 23 percent for the year, based on a report reviewed by ValueWalk. 

[Picasso]

Now the stock trades back to 60 on earnings after hitting 70 this morning.  Ridiculous amounts of volatility for something which Icahn and Stiritz have done back of the envelope "no-brainer" math on.