(B)(N) HLF Herbalife Limited

Drama. Herbalife Limited has come out swinging to defend its business model against allegations made by the opportunistic hedge fund managers at Pershing Square Capital Management and earlier, in May, by Greenlight Capital Management (The Associated Press, January 10, 2013, Herbalife defends itself against claims made by hedge fund manager Ackman about its business) both of whom have graced our Posts in earlier instances of variations on the theme of greenmail and, less charitably, blackmail (please see our Posts, (B)(N) CNR Canadian National Railway Company, December 2012 and (B)(N) YHOO Yahoo! Incorporated, November 2012).

We have, of course, often chuckled (with reservations) at the presumptions of hedge funds and hedge fund managers (most recently, please see our Post, Hedge Funds Bushwhacked By Volatility, November 2012) and the issue for us is not laughter but defence – how do we protect our investments and our money against the suddenly noisy ravings of the fiscally malnourished lunatic fringe that keeps stepping up to the plate, so to speak.

Herbalife has been in our Perpetual Bond™ since $10 in 2009 and our usual protective put (please see almost any of these (B)(N) posts) saved us from a Greenlight at $70 to $40 in May (please see Exhibit 1 below). The current Risk Price (SF) is $52 and the second feeding by Pershing Capital has apparently influenced the stock price to a significant discount as low as $24 in December to close today at $39.

Fortunately, we missed all of that but the privately owned hedge fund, Third Point LLC, recently purchased 8.9 million shares and an 8.2 per cent stake in the company that they might have picked up for between $200 million and $300 million at those prices (Bloomberg News, January 10, 2013, Loeb’s Third Point Takes 8.2% Stake in Herbalife). Nor are they alone in rejecting the allegations of Pershing Square Capital Management whose “short” position of allegedly 20 million shares is now merely “stunted” and the subject of an SEC inquiry.

Exhibit 1: (B)(N) HLF Herbalife Limited – Risk Price Chart

Herbalife Limited is a global marketing company that sells weight management, nutritional supplement, energy, sports and fitness products and personal care products.

(Please Click on the Chart to make it larger if required.)

From Herbalife:

We are a global nutrition company that has helped people pursue a healthy, active life since 1980. Our nutrition, weight-management and personal care products are available exclusively through dedicated independent Distributors in more than 80 countries.

We support the Herbalife Family Foundation (HFF) and its Casa Herbalife program to help bring good nutrition to children in need. We also sponsor world-class athletes, teams and events around the globe, including the LA Galaxy and FC Barcelona soccer clubs, as well as champions in more than 15 other sports.

Our Mission is to change people’s lives by providing the best business opportunity in direct selling and the best nutrition and weight-management products in the world.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.