Smoke and Mirrors...
Herbalife (HLF) shares have been spiraling, financials are an absolute mess and George Soros slashed his holdings by about 60% earlier this month. Could it possibly get any worse? Oh yes it can, says Tony Sagami of Mauldin Economics. "Timing is everything, but I have very little doubt that Herbalife's stock will be significantly lower a year from now," he said. Sagami offered up a deep, Bill Ackman-esque bear case, in which he explained that "the biggest red flag I see is the abusive financial engineering that Herbalife is using to prop up its stock." In a word: buybacks. "Herbalife wasted hundreds of millions of dollar of shareholder money by buying stock at much higher prices," he said. "And now that revenue, profits, and free cash flow generated by operations are shrinking, Herbalife is on a collision course with insolvency."
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