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March 17, 2013

Share Tip on NYSE Stock Herbalife

This Stock Market Tipster has followed with interest the recent playground battle between three hedge fund titans over the nutritional supplements company, Herbalife (quoted on NYSE), but it’s time to get off the fence and give a share tip on where it is all likely to end.  The best stock market tips are usually given after the dust has settled.

 

For those of you unfamiliar with the story, it started back in December when William A Ackman opined that Herbalife was a pyramid scheme, based on the way it sold its products and to whom.  Naturally, Herballife vehemently denied those claims and they were supported by two other monsters of the hedge fund world, Daniel S Loeb and Carl C Icahn, two stock market gurus with legendary status for giving the best investment tips.

 

All of the undignified mudslinging between the protagonists is just a distraction from the core issue here – how is the company likely to perform on the US stock market today and should a self-respecting financial market tipster include it in his list of top share market tips?

 

Investors should be aware that there is every risk of a short squeeze in these shares, implying the price could spike higher temporarily, I believe William A Ackman is the man to follow here.  My decision is heavily based on this article by Matt Stewart on SeekingAlpha, which highlights an extremely worrying compensation scheme encouraged by Herbalife, known as ‘Inventory Loading’.  I’d encourage anyone with a long position in this NYSE stock to seriously read the article.

 

I am therefore recommending Herbalife as a SELL at $38.44 on my list of American Stock Market Tips.  Where all this will end is anyone’s guess, but as Steven M. Davidoff recently wrote in The New York Times: “It’s not likely to end soon.  Herbalife will be under great pressure to keep its earnings up while Mr Ackman continues to push the company to change how it reports those earnings.”

 

Those of you wishing to keep track of the movements in the Herbalife share price can click here.

 

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