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Carl Icahn Adds HLF as Herbalife War Erupts

March 14, 2013 | About:
Sally Jones

Sally Jones

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In his sixth add of Herbalife Ltd. (HLF) since his buy on Feb. 4, 2013, Guru Carl Icahn again increased his stake by 2.01% on March 8, 2013, for a total current shares of 16,355,131. Icahn is listed as 10% owner of Herbalife Ltd. The current price of HLF is $40.38, with a change from average down 3%. Founded in 1980, Herbalife Ltd. is a leading provider of weight management and nutritional supplements operating in 72 countries through a network of 2 million independent distributors.

In the first quarter of 2013, Herbalife (HLF) got more than its fair share of press with controversial statements made by Gurus Bill Ackman of Pershing Square Capital Management LP and Carl Icahn of Icahn Capital Management LP, and others arguing about the Herbalife business model. Last week New York investor and attorney Daniel Ravicher filed paperwork in Manhattan Federal Court to force three banks to pull back $1.2 billion of financing for Herbalife. According to the New York Post, Ravicher filed another separate lawsuit seeking to force Icahn to pay damages and divest his stake in Herbalife.

With HLF stock down more than 40% from a year ago, Herbalife defended itself against Pershing Capital, according to the Wall Street Journal today, with a statement that said, in part:

“We regret that the National Consumers League has permitted itself to be the mechanism by which Pershing Square continues its attack on Herbalife. If anything, it is Pershing Square that should be investigated by appropriate authorities. Its actions are motivated by a reckless $1 billion bet against the company based on knowingly false statements about Herbalife. Those statements unquestionably cause harm to our consumers and investors and indeed all consumers and investors.”

Herbalife Ltd. has a market cap of $4.1 billion, a P/E of 9.5, a P/S of 1.1686, and a P/B of 10.4. The company’s 10-year financials show revenue growth of 16.1% for annual rate per share, and 23.5% over the previous 12 months. EBITDA growth was 13% over 10 years and 21.5% over the previous 12 months. Herbalife’s return on capital gets a 140, according to Joel Greenblatt, and is ranked higher than 96% of the 123 companies in the industry where the ROC median is 18.4.

GuruFocus performed a financial checkup on Herbalife Ltd. and found two positive signs: First, for per share revenue, HLF shows consistent growth with predictable revenue and earnings growth. Second, the company’s operating margin is expanding, usually a good sign.

Here’s an in-depth analysis of HLF.

In the last six months, other Gurus have added or initiated positions in HLF, including Daniel Loeb, Ken Heebner and Steven Cohen. Joel Greenblatt bought HLF on Sept. 30, 2012 and sold out three months later. Jeremy Grantham reduced his HLF position by 29.08% on Dec. 31, 2012.

Here’s a look at Insider Trades at Herbalife Ltd.

Here’s a summary of Carl Icahn’s top buys, top sells and top holdings.



See a great commentary on HLF.

GuruFocus "Real Time Picks" reports the stock purchases and sales that Gurus have made within the prior 2 weeks. The report time lag can be as short as 2 days after the date of the transaction. This feature is for Premium Members only. If you are not a Premium Member, we invite you for a 7-day Free Trial.

About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 2.8/5 (8 votes)

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