Tomahawk, WI 07/30/2014 (Basicsmedia) – Herbalife Ltd.(NYSE:HLF) has faced increased scrutiny in the market especially from billionaire, Bill Ackman, who has from time to time accused the company of engaging in illegal practices. The company’s stock tumbled again on Tuesday trading session by highs of 10% after the company reported revenues that fell below Wall Street Estimates. Flat Growth in North America and declines in Latin America continue to be some of the major concerns facing investors in the company.
Despite the miss-happenings, Bronte Capital Management, John Hempton, continues to remain bullish on the company’s stock maintaining that the company has grown consistently over a long period. Herbalife has maintained a consistent growth because people who survive the initial stage of its product consumption, always end up being regular consumers according to Mr. Hempton.
Mr. Hempton remains bullish on Herbalife on the belief that the company feeds about 10% of what McDonald’s Corporation (NYSE:MCD) feeds on a regular basis. “The company has grown very consistently for a long time now. It has had double digit growth in many-many quarters in many markets. It gets that way by inducing people into daily consumption of their products. Typical places that they recruit 100’s of people, only say 15 survive because most people drop out of the diet, but the people that survive become regular daily consumer of the product, ” said Mr. Hempton, in an interview on CNBC.
The slow growth in Latin America according to the investor can be attributed to the fact that Herbalife has been reducing its operations in Venezuela because it is barred’ by, legal legislation to repatriate its earnings or any profits that it makes. The slow growth in Brazil has, on the other hand, been attributed to the World Cup event where most people opted to party rather than diet.
“Latin America slowed by minus 7% but, in fact, all that slowing was Venezuela and the company have been de-emphasizing Venezuela because it can’t repatriate its money, and whatever profits it has had there are likely to be nationalized,” said Mr. Hempton.
Hempton also reiterated that Herbalife is a company on a growth streak of between 5-7% in volumes with cash flows also growing by between 8 and 9%. Hempton also maintains that Herbalife Ltd. (NYSE:HLF) is trading below 10x earnings with an incremental return on capital of about 100% at the back of a real business unlike sentiments echoed by Bill Ackman.