Herbalife Article from Forbes Magazine
Guru Picks
Gurus Grab Herbalife, Lose Food Companies
Joshua Lipton, data from Marketocracy, 12.22.08, 05:15 PM EST
The M100 jump into the network marketing nutrition company and see some profit potential in short ETFs.
The best performing online investors, Marketocracy's M100, spend a lot of time sitting and staring at flickering computer screens. This desk-bound lifestyle might keep their wits fine-tuned but it could be bad news for their waistlines. So last week these gurus moved to a company that could help them lose a few pounds and make them some money at the same time.
We're talking about Herbalife, a company the M100 think could prove a smart investment. Herbalife sells weight management, nutritional supplements and personal care products in 70 countries through a network of over 1.9 million independent distributors.
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The company breaks down its sales into four major categories: weight management products (63% of sales in 2007) include meal replacement shakes, weight-loss enhancers and appetite suppressors; the targeted nutrition segment (20% of sales) provides dietary supplements; the energy and fitness segment (4% of sales) includes energy and isotonic drinks; and the outer nutrition segment (7% of sales) provides skin cleansers and moisturizers.
In Pictures Buying Herbalife Selling Del Monte
The M100 had sold out of Herbalife in October, which proved a wise move on their parts. The stock slipped hard over the next month, losing 70% of its value by late November. But since hitting a three and a half year low of $15.04 on November 20, Herbalife has now bounced back. The stock has popped 25% in the past four weeks and it's making a hard run at its 50-day moving average.
Bulls on Herbalife write that the company's long-term prospects aren't adequately reflected in the share price. Research analysts covering Herbalife tell clients that they expect strong growth from the South America and Asia Pacific segments and good growth from the U.S. Turning to fundamentals, Herbalife sports double digit operating margins and it is bargain-basement cheap relative to its expected earnings power with a PEG of just 0.37. [Anything less than one is considered a good deal].
Last week, Herbalife said it was reaffirming its previously issued fourth-quarter earnings per share guidance of between 65 cents and 70 cents, and full-year 2008 earnings per share guidance of $3.50 to $3.55. Herbalife also reaffirmed its earnings per share 2009 guidance range of $3.00 to $3.20, a decline in earnings reflecting current business trends, current foreign exchange rates along with the announcement of a restructuring program which will save $42 million annually and was initiated on Dec. 12.
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