Billionaire Dan Loeb Ambushes Ackman On Herbalife Ltd. (HLF)

We think that Avon Products, Inc. (NYSE:AVP), Nu Skin Enterprises, Inc. (NYSE:NUS), and Weight Watchers International, Inc. (NYSE:WTW) are comparable companies as they are either in a similar business or have a similar business model. Nu Skin and Weight Watchers would also generally be considered value opportunities, at least in terms of their value metrics: their trailing earnings multiples are in the 13-14 range. We’d note that both of these companies are popular shorts: 22% of Nu Skin’s outstanding shares and 13% of Weight Watchers’ are held short, somewhat comparable to 27% as of the most recent data for Herbalife. Avon has taken a recent hit to its earnings, and even sell-side expectations of a recovery at the company have its forward P/E at 17. This makes it a clearly pricier stock than Nu Skin, Weight Watchers, or Herbalife going by recent financials.

We think it’s important to note that short sellers do not have to disclose large positions and so it’s possible that other hedge funds have been joining Pershing Square on the short side of this trade. With that said, Ackman’s case against Herbalife apparently has done nothing to sway Loeb; in fact, he’s used the resulting pullback in the stock as an opportunity to make it one of his top picks after not owning any shares as recently as three and a half months ago.

Disclosure: I do not own shares of any stocks mentioned in this article.