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CanadianValue
CanadianValue
Articles (4622) 

Why Activist Investor Robert Chapman Has Put 35% of His Portfolio into Ackman Short Herbalife

January 03, 2013 | About:

Activist investor Robert Chapman has put an astounding 35% of his portfolio into Herbalife, which has of course recently been in the news because Bill Ackman has shorted the company, calling it a pyramid scheme.

Here is his explanation why:

HLF+by+Chapman+Capital+12!29!2012.Unlocked[1]



Here is CNBC discussing the situation:







About the author:

CanadianValue
http://valueinvestorcanada.blogspot.com/

Rating: 4.3/5 (10 votes)

Comments

gusto.duel
Gusto.duel - 3 years ago
Thank you for posting. However the author's logic is not something I agree with.

FTC may launch an investigation despite it being busy with MSFT, AAPL (Google sttled already)

The commodity/overpriced aspects of the HLF products escapes the article, entirely.

Wonder how relevant is the sample for the distributor's survey mentioned in there?

What about Belgium?

sjzhao2003
Sjzhao2003 - 3 years ago
Thanks for sharing!

The merit of the short vs. long case aside, it would be a shame if some well-known big time investors take advantage of their media-savvy and celebrity status for personal gains (NYT has a recent article on this as well). Shouldn't a focused value investor spend all of his/her valuable time on fundamental research? The fact that mere questions during conference calls by a "guru", not to mention the pretty heavy-handed 360-page ppt stack, can move the market so much tells a pretty sad story about the investing public.

I do agree with the author that SEC should require disclosure of short positions just as they do longs. That'd take a big step toward a more level playing field.
batbeer2
Batbeer2 premium member - 3 years ago
@CanadianValue

Thanks!

>> Shouldn't a focused value investor spend all of his/her valuable time on fundamental research?

An investor spending time on research is trying to outperform at the expense of someone:

- less informed

- less well capitalized (forced seller)

- less savvy

- more susceptible

- disinterested and/or

- disheartened

Last year, my stock picks outperformed most indexes.* Unless it was sheer luck, it was because I have an edge on the last three items on that list; not the first three. One could argue I preyed on the weak** so I'm in no position to judge Ackman.

What is your edge? You tell me that and I will tell you who you are taking money from.

IMHO, those who bailed out of Herbalife because of Ackman's presentation got precisely what they deserved.


*Check out the OSTK comments to see precisely how superior returns come at the expense of someone else's loss.

**I like to think I'm just trying to be nice. I'll buy from you when no one else will and sell when there's no one else selling.

paulwitt
Paulwitt - 3 years ago
ESI is down 19.3% today on heavy volume. The news is they have to pay a settlement to Sallie Mae of $46 million.

My comment:

high-frequency trading + short sellers = superb value investing. Thank you high-frequency traders + short sellers!

*I picked up a few shares today to add to the event-driven part of my portfolio

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