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Walter Lu

Walter Lu
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  • Ackman's Gravitas Statistically Provable: Look Out Below [View article]
    What about the investors on the other side? Icahn, Soros, and Stiritz have even better track records than Ackman. Less well-known longs like Kerrisdale Capital's Sahm Adrangi and Bronte Capital's John Hempton also have very impressive track records. "Statistically" it's much more likely that one superinvestor is wrong than many. Ackman has had some spectacular blowups in the past, such as his fund that lost everything buying call options on Target. Herbalife won't be his first major mistake. And don't kid yourself, being bearish on HLF is definitely not a contrarian view. 35% short interest and the number of bears on SA and Twitter make it pretty obvious that HLF is one of the LEAST contrarian shorts in the market today.
    Aug 14 02:58 AM | 11 Likes Like |Link to Comment
  • Herbalife: POOF! There Goes The Bull Case [View article]
    Analysts project buybacks when making their estimates...
    Jul 29 02:06 PM | Likes Like |Link to Comment
  • Herbalife: POOF! There Goes The Bull Case [View article]
    The purpose of a stock buyback isn't to boost the price in the short term. It's actually better if the stock continues to fall as they buy back stock, giving them a cheaper price. A buyback creates long-term value if they can buy back stock under intrinsic value. Think of a buyback as buying any other stock. For example if HLF buys KO stock when it's undervalued, they will make money in the long term. Same as when it buys its own stock.
    Jul 29 02:05 PM | 1 Like Like |Link to Comment
  • Should Weyerhaeuser Shareholders Tender For The WRECO/TRI Pointe Spin-Off? [View article]
    Just got my shares today.
    Jul 10 01:24 AM | Likes Like |Link to Comment
  • Should Weyerhaeuser Shareholders Tender For The WRECO/TRI Pointe Spin-Off? [View article]
    If I understand correctly, there won't be buying pressure from short covering in this case because their shorts will be offset by their new TPH shares.
    Jun 24 05:12 PM | Likes Like |Link to Comment
  • Why Herbalife Observers Still Don't Get It; Herbalife Will Be Shut Down [View article]
    Those who believe the majority of Herbalife's revenues and earnings come from scamming distributors at the bottom of the pyramid should consider this refund policy a very big deal, as it offers a way for the victims to "unscam" themselves and potentially destroy the pyramid scheme.

    One of the following have to be true: 1) The refund is no good - that is, Herbalife isn't actually refunding anyone, or 2) victims are not using the refund policy even though it is available to them and would get their money back, either because they don't know about it or are too lazy, or 3) Herbalife honors the refund policy and revenue and earnings subsequently collapse, or 4) Herbalife is not a pyramid scheme.

    All of them should be easily verifiable. 1 seems unlikely as that would clearly be illegal and would be punished immediately. It would be pretty idiotic of Herbalife to tout their refund policy only to renege on it. 2 is possible but unlikely. Herbalife requires distributors to acknowledge the refund policy before signing up, and if distributors are in the hole for 5 figures, returning product should be the first thing they try to get their money back. I would be interested in how many victims in Ackman's documentary tried to return their unsold product and what their experience was. 3 is obvious. This policy has been in place for a while but it's actually not important how long, because let's assume it just went into effect today. Bears would have to expect an imminent collapse in revenue and earnings. If none of these three possibilities are true, then the only remaining conclusion is that Herbalife is not a pyramid scheme.
    May 8 01:11 PM | 5 Likes Like |Link to Comment
  • Why Herbalife Observers Still Don't Get It; Herbalife Will Be Shut Down [View article]
    Will a short please explain to me how Herbalife can offer a 12-month full refund for unsold product and still function as a pyramid scheme?
    May 8 11:01 AM | 1 Like Like |Link to Comment
  • Why Herbalife Observers Still Don't Get It; Herbalife Will Be Shut Down [View article]
    Worst case scenario: the FTC shuts down Herbalife's US business, but then shorts finally realize that 80% of revenue comes from outside the US and considering that little inconvenient fact, how ridiculous Ackman's claim is that he will "short it to zero." Regulators and customers in Asia and South America continue giving zero shits about what happens to the US business and the stock breaks $100.

    The likely scenario: the FTC gives Herbalife a slap on the wrist and the stock rockets past $200 as it dawns on the shorts that the company is already halfway private, they are stuck in a crowded theater, and now suddenly the curtains are on fire. Remember, if you're gonna panic, at least panic early. Enjoy the squeeze.
    May 8 02:30 AM | 2 Likes Like |Link to Comment
  • hhgregg's Sell-Off Is Overdone [View article]
    Not that familiar with this company but I think there's more to the story for the bear case - short interest is 45% of float.
    Feb 7 04:24 PM | 1 Like Like |Link to Comment
  • Exploring Mr. Stiritz's Options With Herbalife [View article]
    At what point do we shut down casinos? They offer a similar appeal: "Chances are you are going to lose money, but then again, you might be among the lucky few who get rich." But at least Herbalife helps customers lose weight and live healthier lifestyles, which cannot be said about casinos.

    What about cigarette companies? Here is their value proposition: "We will charge you exorbitant prices in return for getting you addicted to a habit that will poison you for the rest of your life. And it will probably kill you." Does it have any redeeming qualities? They don't even offer people the upside of becoming a millionaire. Why don't we see Ackman on a crusade against Philip Morris? Herbalife and MLMs in general are relatively benign.

    And I'm sure people realize that the vast majority of startup businesses fail. You don't see anyone complaining about that though. Because welcome to capitalism, where people have the freedom to take on risk if they choose to, and a lot of them will lose. Starting an Herbalife distribution business is no different in that sense and I believe the majority of distributors are cognizant of that fact going in.
    Jan 31 04:02 PM | 2 Likes Like |Link to Comment
  • Exploring Mr. Stiritz's Options With Herbalife [View article]
    Or he could simply hold onto the stock for years and wait for the story to play out. Stiritz has much more staying power because he's a long-term investor investing his own money, whereas Ackman is a short-seller investing other people's money, meaning he will have to worry about short squeezes and investor redemption. Stiritz investing a huge part of his net worth shows he has that much conviction in the business fundamentals and won't be easily scared by a drop in the stock price.
    Jan 30 03:05 PM | 3 Likes Like |Link to Comment
  • Exploring Mr. Stiritz's Options With Herbalife [View article]
    Agreed. As a side note, here are the industries the companies in The Outsiders belonged to: 4 in media, 2 conglomerates, 1 in defense, and 1 in packaged foods (Ralston Purina). Stiritz was the only CEO profiled from the entire consumer staples sector for a reason.

    Here's a nice quote from the book: "He was well known for showing up alone to important due diligence meetings or negotiations where the other side of the table was crowded with bankers and lawyers. Stiritz relished this unorthodox approach. A then junior banker at Goldman Sachs told me of a late-night due diligence session during the RJR Nabisco sale process when Stiritz came to a conference room at the Goldman offices alone, armed only with a yellow legal pad, and proceeded to walk through the key operating assumptions one by one before making a final bid and going to bed. He actively enjoyed the investment process and, after selling Ralston, vigorously managed an investment partnership consisting primarily of his own capital." (http://bit.ly/1ffiHW2)
    Jan 30 01:38 PM | 4 Likes Like |Link to Comment
  • Exploring Mr. Stiritz's Options With Herbalife [View article]
    Some of you may not be that familiar with Bill Stiritz. He is one of the eight CEOs profiled in the recent book "The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success" (http://amzn.to/1ffem5b) along with other more well-known CEOs like Warren Buffett, Henry Singleton, and John Malone. At Ralston Purina, he had a long history of value creation through smart capital allocation (for some background: http://buswk.co/1jOpVpQ). So along with Icahn and Soros, the long side is stacked with some of the best investors of all time. Ackman's no pushover but I wouldn't quite put him up there.
    Jan 30 01:10 PM | 6 Likes Like |Link to Comment
  • Suntech Finds Friend In Wuxi, Foe In New York [View article]
    STP has not been reorganized through bankruptcy yet. Only the Wuxi subsidiary is in bankruptcy. The plan is for the Wuxi sub to be sold, and the proceeds to be used to pay the Wuxi creditors (who will still be taking heavy losses). The STP holding company will be left with the insolvent GSF subsidiary and a lot of defaulted debt.
    Nov 5 12:11 PM | Likes Like |Link to Comment
  • Clouds Lift For Canadian Solar, Suntech [View article]
    Good point. STP bonds hit new lows yesterday, under 20 cents on the dollar. There's a good chance they are worth even less than that.
    Nov 5 12:04 PM | Likes Like |Link to Comment
COMMENTS STATS
184 Comments
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