GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Whitney Tilson Thinks Ackman's Investment Analysis on Herbalife Was "Astonishing!"

December 26, 2012 | About:
CanadianValue

CanadianValue

209 followers
I guess size does matter after all! Because at 340 pages the Ackman presentation is large.

Here is what Tilson had to say in an e-mail sent to his followers:

"Pershing Square’s analysis of Herbalife is the most remarkable piece of investment analysis I have ever seen. Simply astonishing. And kudos to Pershing Square for making all of it public – not just the 300+ page slide presentation, but all the supporting materials. For the many young people on this email list who are looking for a job in this industry, study this carefully – if you can do analysis even a tiny fraction this comprehensive, there will always be a job for you…

Hopefully it results in massive reform of this whole sector, which has preyed upon MILLIONS of vulnerable people all over the world for decades. This has been blindingly obvious to anyone who’s done even cursory analysis, but for some reason regulators at the state and local level have done almost nothing to rein in the widespread abuses – it’s just like subprime mortgages and student lending. This is one area in which China is WAY ahead of us: it’s simply outlawed ALL multi-level marketing – a very good idea in my opinion…

Disclosure: I am short a tiny smidge of HLF (good luck getting the borrow) and a number of other multi-level marketers."

It is interesting to note that Tilson is short a "number" of other multi-level marketers.

Tilson also provided the link to the Ackman presentation:

http://factsaboutherbalife.com/wp-content/uploads/2012/12/Who-wants-to-be-a-Millionaire1.pdf

About the author:

CanadianValue
http://valueinvestorcanada.blogspot.com/

Rating: 3.9/5 (13 votes)

Comments

vgm
Vgm - 1 year ago
Size matters in some areas of life - but not, in my humble opinion, in producing investing theses. Buffett and Munger often talk about how if an investment idea needs a deep analysis, then it cannot be such a great idea and should probably be on the "too difficult pile". They say quality ideas jump off the page at you.

I'm sceptical of Ackman. Seems to me he's always looking for publicity and sensationalism. It was of course David Einhorn who first spoke up about HLF. And Whitney Tilson's constant fawning to Ackman is surprising, to be charitable about it. He also praised Ackman to extremes about the $HK trade. I guess we're still waiting for that one to work out. Oh, and then there was the GGP fiasco. Not to mention the little matter of JCP.
crafool
Crafool - 1 year ago


I think this is the perfect time to draw/circle the distinct differences in today's investment world. Specifically, I am refering to the "Not Necessarily Business News" that is CNBC and one of the network's self described "All-Star/Stock and Market Guru Jim Cramer and real analysis, research and real investors. I think this can be best illustrated by the Ackman and Einhorn conclusions regarding Herbalife and presented above and the following from CNBC and Jim Cramer:

"michael johnson, congratulations for everything you do for shareholders. i think we're still early, i'm not kidding. thanks, jim. we feel the exact same way and appreciate the opportunity to tell other story with you. thank you. great to talk to you. i don't know how many ceos have come on this show that has been bankable as he is. when his company was under atrack, completely falsely and wrong, he came on the show. one of the greatest buying opportunities in seven years. stay with cramer"

This was copied directly from the transcript of the February 22, 2012@ 6:25 p.m. show on Mad Money titled "Herbalife Shares Gain on Obesity Play". Cramer interviews Michael Johnson, CEO of Herbalife.

This is the link: http://search.cnbc.com/main.do?partnerId=2000&keywords=michael%20johnson%20cramer&sort=date&minimumrelevance=0.2&pubtime=365&pubfreq=d&categories=exclude&page=2

CNBC should be required to either post a permanent warning on the networks program warning investors that CNBC is not necesssarily news, but rather entertainment and opinions, statements and conclusions drawn from their talent are not to be construed as qualified advice or they should remove these actors, producers and replace them with serious reports rather than talent.

Just one way to see CNBC is more like Not necassarily the News than a news show. This is all just my opinion, but I think more and more are sharing it and CNBC should know it.

Happy investing to all you "All-Stars"
batbeer2
Batbeer2 premium member - 1 year ago
>> Hopefully it results in massive reform of this whole sector, which has preyed upon MILLIONS of vulnerable people all over the world for decades. This has been blindingly obvious to anyone who’s done even cursory analysis, but for some reason regulators at the state and local level have done almost nothing to rein in the widespread abuses

It's a great analysis but IMHO it's not a good reason to go shorting a growing company at 7x FCF.

1) If ethics had anything to do with the performance of stocks, investors would have gone broke investing in Philip Morris in the sixties.

2) If one views this as a Ponzi/pyramid scheme, the owners of the stock (longs) are at the very top. That is not a bad place to be.

If I had to chose, I would rather short Facebook. While Facebook is legally ripping off shareholders, Herbalife is enriching shareholders by means which are ARGUABLY illegal.

As it is, I wouldn't touch either with a pole (long or short).
vgm
Vgm - 1 year ago
Piece in the WSJ reporting that other short-sellers not on board with Ackman's thesis:

http://blogs.wsj.com/marketbeat/2012/12/27/bet-against-ackman-some-hedge-funds-buy-herbalife-shares/?mod=yahoo_hs
shaved_head_and_balls
Shaved_head_and_balls - 1 year ago
Judging by market under-performance of the average hedge fund for many years--in addition to the outrageous 2% and 20% fees, perhaps hedge funds are jealous that their own schemes are being outdone by various alleged pyramid schemes.
paulwitt
Paulwitt - 1 year ago
It works until it doesn't

ecotycoon
Ecotycoon premium member - 1 year ago
It was certainly the best analysis i ever seen... Great inspiration... still many thing can happen sound to me like pretty risky bet ... Herbalife can change their business model to adapt it to the SEC regulation, likely to cost money but can make the firm survive... The management is also likely to do everything they can do to survive... They have the money to fight... quite a strong financial strength...
Ranni
Ranni - 1 year ago
"Simply astonishing. And kudos to Pershing Square for making all of it public – not just the 300+ page slide presentation, but all the supporting materials. "

What a waste!

Richard Rainwater said it well...





"If you can’t pencil it out in six lines on the back of an envelope… forget about it."

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK
Email Hide