A transcript of David Einhorn's questions and management answers on the Herbalife (HLF -26%)...

A transcript of David Einhorn's questions and management answers on the Herbalife (HLF -26%) conference call shows Einhorn trying to home in on how many retail buyers of the product there are out there vs. distributors who are buying. It's the age-old question for multilevel marketing companies, several others of which are also tumbling: AVP -7.9%, NUS -13.3%, USNA -5.6%. (earlier)

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Comments (11)
  • Stone Fox Capital
    , contributor
    Comments (9704) | Send Message
    Amazing how a known question can become a big issue just b/c the 'right' person asks it.
    1 May 2012, 02:47 PM Reply Like
  • Boxed Merlot
    , contributor
    Comments (1596) | Send Message
    Did I miss him asking Timmy the same question?


    I would expect to see Bens stock fall too for the same response to the "age-old question for multi-level marketing companies".
    1 May 2012, 03:01 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3121) | Send Message
    Valid questions, and management could have been better prepared: "we don't have an exact percentage David because we don't have visibility to that level of detail." I'd say the selloff is overdone, but this company is still expensive.
    1 May 2012, 03:04 PM Reply Like
  • AxiosCap
    , contributor
    Comments (312) | Send Message
    Yet PRI remains unscathed. Same crap, different area of business.
    1 May 2012, 03:04 PM Reply Like
  • Jeremy Johnson, CFA
    , contributor
    Comments (775) | Send Message
    The far funnier part of the transcript is much later:


    "So, Linda, thank you for noting that we don't call it that word that you mentioned. Yes, so this is for everybody on the call who isn't familiar, this is an automated sales center..."


    AKA vending machine.
    1 May 2012, 06:01 PM Reply Like
  • Husky Financial
    , contributor
    Comments (213) | Send Message
    Einhorn talks and the market listens for a reason... the guy knows his stuff. He does his homework. His presentation on the inventory shenanigans that GMCR was pulling was spot-on. Until he royally F's up, I will continue to give the guy high merit with his calls. It's what makes him one of the best in the biz.
    1 May 2012, 09:44 PM Reply Like
  • JB Murphy
    , contributor
    Comments (89) | Send Message
    His "presentation" on GMCR has done nothing more than create a huge buying opportunity for GMCR longs.


    Nothing, absolutely nothing, has come from the GMCR allegations by Einhorn.


    If you think he knows his stuff, buy his fund - GLRE.
    2 May 2012, 04:15 AM Reply Like
  • rambler1
    , contributor
    Comments (1001) | Send Message
    Does it really matter? How much could small distributors stock up before they have to stop buying products? They either have to move the product get paid and pay for their purchases to HLF. Or the alternative take the product and HLF's receivables go up faster than it's sales did. In this case sales were up 20%, and receivable about 18-19%. If receivables soared beyond I'd be very concerned, but that's not the case!
    2 May 2012, 12:01 AM Reply Like
  • eureka!
    , contributor
    Comment (1) | Send Message
    Does it really that important to know how many retail customers actually buying the products as long as the company receives the cash for the sales? My wife purchases her Nuskin products through her friend who 's an agent. So what the company can't figure out if it is the agent or my wife bought it as long as my wife pays for it. David Einhorn may have asked a legitimate question but not a very significant one unless the company's trade receivable is piling up mountain high and cash is diminishing trend.
    2 May 2012, 02:39 PM Reply Like
  • AxiosCap
    , contributor
    Comments (312) | Send Message
    Actually its very relevant bec if the "agents" cant sell products then they aren't likely to hang around or keep buying the product themselves. It's a common question/ issue with MLM structures.
    2 May 2012, 03:32 PM Reply Like
  • Snoopy1
    , contributor
    Comments (1126) | Send Message
    I think HLF has a return policy where distributors return the product less a 10% handling fee, so excess product does not seem to be an issue.


    In addition, given HLF's FCF has been at least equal to net income over the past 3 years, it seems there is no funny business regarding pushing unsalable product to distributors.


    We'll never know, but maybe Einhorn just wanted the information that was in the prior 10-K. His question seemed very basic and did not indicate any sharp criticism.
    7 May 2012, 04:01 AM Reply Like
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