This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Will Herbalife End Up a Penny Stock?

As a short-term trade, I sold volatility with a long bias based on technical analysis of the chart pattern and the high option premium. Herbalife is oversold in my opinion.

Is Herbalife a good investment? With a forward yield of more than 4% and a single-digit forward price-to-earnings ratio, it's compelling.

Ackman alleges that Herbalife is an illegal organization, so some investors might think a significant downside risk is that the government could shut it down.

But I don't think the downside risk reasonably includes a forced shutdown by the government.

Of course, forced changes in compensation, rules, recruiting as a result of government demands are always a real possibility, but it's hard to argue that such business model adjustments are not already priced in.

I respect Mr. Ackman, and if he states a company is worth zero, I pay attention. You ignore him at your peril, as many Herbalife investors now realize.

But he also has people making slides questioning whether anyone has bought products from a company that generates more than $5 billion a year in sales.

Maybe the chances of Herbalife falling to zero next year are about as low as those of a new contractor making more than $100,000.

At the time of publication, Weinstein was long HLF.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
HLF $30.64 -2.60%
AAPL $127.46 -0.84%
FB $81.86 1.20%
GOOG $576.71 0.58%
TSLA $203.57 0.56%

Markets

DOW 18,139.44 +42.54 0.24%
S&P 500 2,102.39 +3.86 0.18%
NASDAQ 4,987.50 +20.3590 0.41%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs