What You Need to Know Going Into Herbalife Ltd. (HLF)’s Earnings

The question on most minds is whether Icahn’s 13% stake is a sign of true faith in the company, or just a very expensive stink bomb sent to Ackman’s office. When Dan Loeb first took his long position, he stated that his team had thoroughly analyzed Herbalife’s business practices and found Ackman to be wrong and that the company was unfairly undervalued. Yet, by mid February, he is exiting his position. Will Icahn do something similar? The company is bound to impress analysts and investors with its upcoming earnings release, so there should be another near-term catalyst to boost the share price.

Of course, we cannot know for sure whether Icahn is doing this out of well-researched analysis or out of spite. But judging by the extremely harsh words the investor has for Bill Ackman, and Icahn’s history of using brass tactics to make a penny, it sure does look like a personal issue.

Icahn, Ackman, and Loeb are all very talented money managers with the track record to prove it. One cannot discredit their investing prowess. But I do not think that investors should look at Icahn’s stake in Herbalife as a strong sign for the company going forward. I repeat: this is not the time to take a long position in Herbalife. If you are still interested in the company six months from now, take a look at Icahn’s position (if it still exists), that will tell you a lot about whether the money manager was truly bullish behind Herbalife, or just bearish on Ackman.

If you have missed every sentence in this article prior to this one, just understand that it is downright dangerous to take a long or short position in Herbalife at this time.

The article What You Need to Know Going Into Herbalife’s Earnings originally appeared on Fool.com and is written by Michael B. Lewis.

Fool contributor Michael B. Lewis has no position in any stocks mentioned. The Motley Fool has the following options: Long Jan 2014 $50 Calls on Herbalife Ltd. (NYSE:HLF).

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