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TheCompleatAngler

TheCompleatAngler
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  • Bill Ackman's Folly With Herbalife: 7 Assumptions That Led Him Astray [View article]
    A reasoned article with documentation that refutes accusations that Herbalife is an illegal pyramid scheme. How strange that it would be published here on SA where articles about Herbalife seem to be homogeneously accusatory of it being a criminal enterprise. This is so surprising, I'm almost stunned. It's refreshing to be reminded that there are other voices in this debate. What gets published on SA about Herbalife smacks of desperation in tone and content, aside from this unique article. I wish there were more such reasoned articles and also a better balance of articles about this company and its industry. Because, it appears, the authors of virtually all of the other articles published here about Herbalife are compensated by SA, I presume in part for the page views they generate, incentives for authorial objectivity and more reasoned content may not exist. I applaud the author--Kevin Thompson--for publishing this article on SA without remuneration, thus avoiding a conflict of interest; and I challenge Matt Stewart, Quoth the Raven, and others to do so likewise.
    Dec 10, 2013. 01:37 PM | 12 Likes Like |Link to Comment
  • Herbalife: Ackman Is Down To His Last Round Of Ammunition [View article]
    Old Analyst, there's something you didn't mention in your article about Ackman that is important. Contrary to Ackman's assertion, PWC certification of HLF's financial does indeed represent a judgment on PWC's part that HLF is not an illegal enterprise. If PWC had any legitimate reason to believe that HLF was an illegal enterprise, PWC would not have been able to certify HLF's revenue recognition policies. Additionally, PWC as well as HLF's audit committee have legal responsibilities to investigate allegations of illegal activity. PWC absolutely would have considered Ackman's allegations against HLF and have obviously concluded that they were unfounded as evidenced by the certification of HLF's financial statements.
    Dec 26, 2013. 12:42 AM | 11 Likes Like |Link to Comment
  • What Seeking Alpha Is Doing To Prevent Paid Stock Promotion [View article]
    I have noticed that some authors are publishing articles repeatedly expressing an opinion about a stock at rates that seem excessive, and so often the new article turns out to be little more than a regurgitation of previous articles with only the slightest bit of new content added--and so often that new content is nothing more than opinion, completely insubstantive. Here is the profile of one such SA contributor as an example:

    http://bit.ly/1rNkBp5

    This contributor writes articles published on SA expressing a particular view about the stock of Herbalife, which is what SA was designed to facilitate, and it's a wonderful thing. SA functions as a forum for people to express their opinions about the merits or lack thereof of stocks, and because SA is open to anyone with a view to express (except those who have violated SA's terms) and because content published on SA is available to the investing public, it has been a wonderfully democratizing influence in the equities markets. Without SA, most contributors, such as this one, likely would not be able disseminate their views so widely to other interested market participants. I think it's great that this contributor--or any SA contributor for that matter--can voice his or her views about the investing merits of any particular stock, be heard by a not insubstantial number of people, have their written views appear in news feeds, etc. What I find objectionable, however, is when an SA contributor begins producing articles at excessive rates. When this happens, the articles invariably are reiterations of previously published articles, heavy on opinion, light on new fact. For instance, this particular contributor has written 35 articles published on SA since the beginning of last November about Herbalife--an average of 7 per month, or almost 2 per week. The rate of article production is far in excess of the rate of developments related to this or any other company, even a dynamic company in a rapidly evolving industry, that would be of interest to an investor. What is the point of publishing seven articles per month by the same author about this or any company? This amount of production is nothing more than verbal flatulence. Mr. Hoffman, as you endeavor to improve the quality of the content on SA, I wish to offer my opinion that SA would be greatly enhanced by placing some limitations on the volume of articles accepted by any one author about any given company/stock during an interval of time, such as one or two articles per quarter. Most companies don't warrant writing about more than once per quarter. A limitation of one article per month per contributor per company seems like a very liberal limit to me. Placing some limits on contributor article volume would improve the content of the articles from over-producing contributors as well because of the discipline it would force upon the authors.

    When someone publishes articles on SA at the aforementioned rate, it is natural to presume that they are either doing it for the income (Charles Dickens was paid by the word for his stories serialized in magazines), because they are narcissistic, or because they believe that repeating themselves ad naseum in public may elicit a market reaction that they desire, all of which degrade SA's content and thus the experience of its readers.

    I applaud you, Mr. Hoffman, and your staff as your strive to improve SA and wish you the best of luck--
    Mar 28, 2014. 10:20 PM | 9 Likes Like |Link to Comment
  • NQ's U.S. Veneer: Withholding Facts, Conned Men And A Convicted Racketeer [View article]
    This article is tanatmount to surrender.
    Nov 12, 2013. 01:35 PM | 7 Likes Like |Link to Comment
  • Can I Get Bullish On Herbalife Now? [View article]
    I forgot to note in my prior comments that PWC's certification, among other things, means that PWC stands behind HLF's revenue recognition policies. In order for PWC to do that, PWC must judge to its satisfaction that HLF's revenue recognition policies are fully disclosed and compliant with GAAP. Implicit in doing this, PWC must make a judgment that HLF is a legal enterprise. Claims that auditors make no judgments about the legality of the enterprises whose financials they certify are ludicrous and reflect breathtaking naivete or ignorance.
    Dec 17, 2013. 11:02 PM | 6 Likes Like |Link to Comment
  • Can I Get Bullish On Herbalife Now? [View article]
    QTR, Ackman, and Cramer are apparently blissfully ignorant about the role of outside auditors. The auditors, PWC, and HLF's audit committee have a legal responsibility to investigate allegations of wrong doing.
    Dec 17, 2013. 03:00 PM | 6 Likes Like |Link to Comment
  • Time Is On The Side Of The NQ Longs [View article]
    If I understand your critique accurately, you are not asserting failure to disclose Xu Rong's relationship with YDT and with NQ, whether it meet the standards for materiality or not. You are asserting, however, that disclosure about these relationships over time have been inconsistent or partial in the details presented, which is to say imperfect disclosure. That seems like a reasonable criticism but a minor quibble.

    Since the relationships have been disclosed, one can't very well argue that information about a related party transaction--if that's what it was--has been suppressed. One can argue that it hasn't been clearly presented. This inconsistency doesn't seem like it would meet the threshold of materiality to me, especially because it occurred several years prior to the IPO. If such an inconsistency had occurred close to or after the time of the IPO, I would think otherwise.

    An observation I'll make after reviewing the aforementioned prospectus language is that NQ's contract with YDT is for a term of five years and ends in June 2015, which implies that it was entered into in June 2010. June 2010 was approx. a year prior to the IPO and at least a year-and-a-half after Xu Rong left NQ; so NQ's contract with YDT from beginning in June 2010 through the present, overlapping with the IPO and bond offering, would have been entered into on a non-related party basis. There is no information about the terms of the contract NQ and YDT had leading up to June 2010 or when it was entered into. Even if you could make a convincing argument that Xu Rong qualified as a related party for a fraction of 2008, I don't see that poor disclosure--as opposed to no disclosure--matters much if at all in this case. This certainly doesn't seem like the kind of issue that would cause accounting restatements, and I don't see how IPO investors would have been harmed from this lack of clarity. This seems like nit-picking that leads nowhere.
    Nov 30, 2013. 11:02 AM | 6 Likes Like |Link to Comment
  • Is The Issue Of Illegal Saturation Of Concern To Investors? [View article]
    I do not see promoter churn as an important metric in the MLM industry. Every company has high churn because lots of people sign up on a whim or are talked into it by a friend and then do nothing to sell the product. The 80/20 rule applies to the industry, where 80% of value is created by the top 20% of promoters. Those top promoters don't churn b/c they are clipping big monthly checks. Customer retention, if it was reported, would be a more interesting metric.
    Sep 9, 2013. 07:09 PM | 5 Likes Like |Link to Comment
  • Chasing Historical Performance [View instapost]
    CD, your phrases "to linearly extrapolate recent stock performance" and "mean reversion and losses" are echoed in passages from a book published long ago-- the first edition of Security Analysis by Graham and Dodd (1934). From pp. 433-434:

    "The mistake of the market lies in its assumption that in every case changes of this sort [in the earnings trend] are likely to go farther, or at least to persist; whereas experience shows that such developments are exceptional and that the probabilities favor a swing of the pendulum in the opposite direction.
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    it must be remembered that the automatic or normal economic forces militate against the indefinite continuance of a given trend. Competition, regulation, the laws of diminishing returns, etc., are powerful foes to unlimited expansion; and in smaller degree opposite elements may operate to check a continued decline. Hence instead of taking the maintenance of a favorable trend for granted--as the stock market is wont to do--the analyst must approach the matter with caution, seeking to determine the causes of the superior showing, and to weigh the specific elements of strength in the company's position against the general obstacles in the way of continued growth."
    Apr 16, 2014. 01:48 PM | 4 Likes Like |Link to Comment
  • Time Is On The Side Of The NQ Longs [View article]
    What do you think the odds are that NQ's historical auditor PWC would have failed to require a related party disclosure if one were necessary. Additionally, NQ has been scrutinized by investment banks, their lawyers, etc. for an IPO and also the recent convertible bond offering. For the scenario you posit to be true, they all would have had to miss that a related party disclosure was necessary.
    Nov 29, 2013. 10:39 PM | 4 Likes Like |Link to Comment
  • Bill Ackman Will Swiftly Drop The Firm Hammer Of Justice Against Herbalife On Friday [View article]
    The hammer has fallen, and the stock price is levitating. Justice, according Quoth the Rave. Upon whom did the hammer fall?
    Nov 22, 2013. 10:40 AM | 4 Likes Like |Link to Comment
  • NQ Mobile: 1 Question, 5 Answers? [View article]
    Keubiko, you must not be on NQ's distribution list and thus have not seen today's commentary from the company about muddy waters's critique. I'll do you a favor and reprint here the passage from today's commentary that pertains specifically to Yidatong and Xu Rong, but in the interest of brevity I'm going to omit management's discussion of the payment cycle from carrier to Yidatong to NQ:

    As previously disclosed in each of our audited 20F's, the amount of revenues that flow from carriers through Yidatong to NQ has been provided in complete detail. Yidatong is an important payment processing service provider for NQ, and one of several that play an essential role for billing processing for both NQ and others across the industry. We have already disclosed that Yidatong is an independent operating company and provided information to verify that NQ has never had an ownership interest in Yidatong. The business interaction and payment flows have been vetted, audited, and continually verified. We have the bank transfer receipts detailing all of the actual cash transfers from YDT to NQ in 2012 and we are making verification available to our third party auditor. Additionally, we have also made available the monthly reports that YDT delivers to NQ detailing the payments collected on behalf of NQ with carrier partners. These reports, along with the cash transfer receipts are the kind of thing that auditors and our independent third party auditor use to verify and then cross check with actual cash flows.

    Ms. Xu Rong indeed worked as a consultant at NQ from the spring of 2007 until the end of that year. She then worked actively part-time as NQ's director of marketing from the end of December 2007 until August 2008. There is nothing revelatory or earth-shattering about a company working closely with and partnering with individuals who previously worked together. In fact, it is quite normal, expected and often optimal to work with partners that you have come to trust and appreciate. Further, and to restate, the relationship with Yidatong and NQ has been fully disclosed, fully vetted, and fully verified every step of the way. We have had many third parties, investors, and even reporters visit the Yidatong office in Beijing – which they share with Ms. Rong's other business 9Hcom (a PC gaming company she also owns).
    Nov 4, 2013. 04:13 PM | 4 Likes Like |Link to Comment
  • NQ Mobile Q4 Earnings Preview: Will The Company Beat Revenue Estimates For The Twelfth Straight Time? [View article]
    Justin, the earnings report mentions that NQ recently completed a deal to acquire another company--Tianjin HuaYong Wireless. I want to note that a majority of the purchase price has been made in restricted stock. This is another indication that the allegations of fraud haven't been found to be substantive; otherwise why would the sellers be willing to accept NQ's stock in partial payment for their company? If there were fraud at NQ, there's no chance that stock would be issued given the intense scrutiny that the company has been under.
    Apr 10, 2014. 06:38 PM | 3 Likes Like |Link to Comment
  • Barclays Beefs Its Herbalife Analysis [View article]
    Herbert, each country that Herbalife has operations in regulates Herbalife according its own laws. US law is as irrelevant in Belgium and Taiwan as the laws of those countries are in the US. You appear to have a U.S. bias and provincialism in your worldview.
    Apr 10, 2014. 12:26 PM | 3 Likes Like |Link to Comment
  • Barclays Beefs Its Herbalife Analysis [View article]
    QTR, I challenge your belief that Herbalife will become worthless. Approximately 80% of H's revenue is generated beyond US borders, and the holding company is incorporated offshore. If the FTC were to successfully sue H to shut down US sales, H would presumably lose 20% of its revenues, but the other 80% would continue as going concern, and that 80% would have intrinsic value far above $0.
    Apr 10, 2014. 04:48 AM | 3 Likes Like |Link to Comment
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172 Comments
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