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Usana Looks Good

|Includes:HLF, USANA Health Sciences Inc. (USNA)

Normally we don't hang around in companies with massive short interest, but in the case of Usana (NYSE:USNA), we like it as a long.

The company has strong free cash flow, high return on invested capital, and trades at a valuation which more than discounts the fact that it is a multi-level marketer.

The concerns of the shorts are not new, and lack a catalyst. The MLM group sold off considerably when Einhorn took to the Herbalife (NYSE:HLF) conference call. A quick look at a long-term chart for USNA shows this is one of the best valuations in years, at a time when the company is executing very well.

There is no "short squeeze" in spite of the massive short interest. Shares are readily available to borrow. The possibility of stock loan conditions tightening on this name is just one of many potential catalysts, but we are not counting on this.

The record earnings and strong positive earnings revision momentum should soon drive record share price.

Disclosure: I am long USNA.

Additional disclosure: The author owns no equities individually, but is the managing member of the general partner of a hedge fund which holds equity positions, including USNA. These positions may chance at any time without further notice.

Stocks: USNA, HLF