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Overall I am a conservative investor with a diversified portfolio. As a sideline I gamble on single positions for a short-term gain. I hunt for bargains especially in Tech as that is my home turf. I do this normally (but not always) for a day trade before escaping back to cash. My specialty is... More
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  • The Truth About Herbalife - AS AN INVESTMENT

    Herbalife (NYSE:HLF) is one of the hottest discussion topics on Seeking Alpha. The aim of this little inquiry is to find out whether investing in the stock is a good bet for you.

    Icahn vs. Ackman feud: this is a fact of life at this time. Let's just boil it down to Icahn is long and Ackman is short.

    Risk vs. reward: There is an argument that was manufactured by the "activist investor" Ackman that Herbalife is a "pyramid scheme." If that argument is annulled, you have a company that is overwhelmingly held as a safe investment by professional institutional investors. Why? Well we see about 10/1 forward P/E ratio. We see a solid balance sheet. We see that it is in the "Consumer Staples" sector. We see it pays regular dividends.

    Before the Ackman campaign discovered the alleged "pyramid scheme," the company had been doing business for over thirty years, and developed international sales. Each investor must decide for herself whether to believe the outcome of the investigation that Ackman finally induced the FTC (NOT the SEC) to undertake.

    Below is a graph of the company's stock price for the calendar year 2014, to date. The data show a 19% decline this year. Given the solid financials, which include two positive earnings surprises so far this year, the investor's choice is simple. If you think the FTC investigation will satisfy Ackman's criteria, you want to sell short. If you do not know, you should invest elsewhere. IF YOU BELIEVE THE INVESTIGATION WILL NOT FIND WRONG-DOING, THERE IS A NINETEEN PERCENT BUILT-IN GAIN TO BE HAD.

    HLF Chart

    HLF data by YCharts

    Disclosure: The author is long HLF.

    Additional disclosure: As of this writing my HLF position is up 2.3% in a one-month period.

    Tags: HLF
    Jun 17 4:40 PM | Link | Comment!
  • Time To Get Back Into The Protein Shake!

    Very quick little post here. Herbalife (NYSE:HLF) has a recent stormy history thanks to the efforts of William Ackman. Ackman is the "activist investor" who tried to single-handedly destroy the market capitalization of the company. For his effort he lost many millions of dollars. He finally induced the government to do an investigation of the company. And we all know how important and history changing these investigations typically pan out.

    That said, look at the price history of the stock in 2014. HLF Chart

    HLF data by YCharts

    I will not bore you with an elaborate play by play of the ups and downs. Just notice that it averaged a downward spike about once a month. Then since mid-April it just keeps going up at a nice steady clip. In a perfect world you would have bought it in mid-April but anytime before the eventual announcement of the non-finding of the investigation is time to get in. Get in for that. Get in for the 13/1 P/E ratio. Get in for the annual 1.9% dividends. Get in for the fact that is in the defensive Consumer Staples sector. Get the picture.

    Disclosure: I am long HLF.

    May 23 1:32 PM | Link | Comment!
  • Twitter Is No Facebook: A Little Thing Called Profitability

    Again and again we see $FB,$TWTR, $LNKD rise and fall together as the marketplace currency of social media gains and loses favor. This is a misconception that will cause some people to lose money even though there is money to be made in this subsector. Let's focus on the first two companies and leave the more confusing subject of LinkedIn for another essay.

    The first key to being able to predict the 2014 outlook for these companies is to view them independently of the social media catchall. Let's look at profitability: Facebook is the leader in profitability. They have beaten Google, the 10,000 lb monster, in profitability of mobile advertising. We would like a lower P/E ratio. Right. The poor P/E ratio results from the tremendous amount of investment, mostly in software engineer salaries. Simple and easy-to-use are complicated and expensive qualities to engineer. That is why FB is more easily accepted by the older crowd, as well as tech-savvy youngies. Advertisers agree and that is why Facebook turns a profit.

    Contrast the profitability of TWTR, or lack of it. Twitter would like investors to think that it is following a logical progression to profitability similar to its predecessor, Facebook. Thus it is buying patents from IBM like was done by FB. But do we really believe that the rise to profitability is just a predetermined series of steps? No. FB rose to a type of profitability that is different from what TWTR needs to attain. Every business should have a FB presence. That includes lawyers, doctors, election campaigns, you name it, any sort of enterprise. FB is a collector of all these disparate entities that need a web presence. So even if the teens abandon FB, it will still have a profitable niche.

    TWTR can only be profitable if it stays "cool." Cool is the realm of a younger demographic. Yes, the Pope is on Twitter. But he doesn't just suddenly have an idea while sipping his cappuccino and grab his smartphone. It's done for him, probably even the wording of the tweets. Once the Pope, government leaders, ceo's are informed by their staff that nobody uses Twitter anymore, that will end their usage. So profitability relies on the continued fascination of the younger crowd. If something new comes along, Twitter will fade away. A holder of Twitter stock will not necessarily lose it all. The capability will be absorbed into another entity (NASDAQ:GOOG) and you will still have tweeting as you have today. But this outcome will happen only after a serious decline in the stock price due to it becoming apparent that TWTR never learned how to turn a profit. So far the only sign of viability has been a steady increase in revenue. When will TWTR profits start? It didn't take FB this long.

    Disclosure: I am long FB.

    Additional disclosure: I recently opened a FEB14 bear call spread on TWTR, currently down fourteen dollars. If it profits, will continue to roll it to the next month in 2014. All I have done with FB is hold it for unrealized gain of 46.88 percent to date, piece of cake.

    Tags: TWTR
    Jan 31 1:12 PM | Link | 2 Comments
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