That's not to say the company is above suspicion or without risk. Some very questionable statics about Herbalife can be found in information supplied by the company itself; for example, 73% of Herbalife distributors only sign on to get a discount on the product (paragraph 1, sentence 2). Herbalife has 2.3 million distributors. I find it hard to believe that 1.67 million of them decided to invest thousands of dollars in a Herbalife distributorship because the product is so amazing that they just had to have a garage full of it. That sounds more like a decision made in resignation, when faced with the fact that they just can't sell the stuff. But the important thing to understand is that it doesn't matter. The stock isn't the product or the company. There is a huge gap between what is questionable and what is legal. Unless and until the Federal Trade Commission opens a formal investigation, any misgivings that Ackman or anyone else has about the company are moot. If the chart is correct, Herbalife stock is probably going higher -- maybe a lot higher.
At the time of publication, Ponsi had no positions in the stocks mentioned.
Editor's Note: This article was originally published at 12:00 p.m. EST on RealMoney Pro on Nov. 25.