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Sometimes even Cramer, an industry vet, falls prey to the hedge-fund rumor mill. Such was the case when he gave the thumbs-down to Herbalife on June 17, citing the company’s weak business model, only to watch the stock rebound 44.5% since then.
The short sellers like to libel Herbalife [HLF
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], seller of nutritional supplements and personal-care products through multilevel marketing and direct selling, as nothing more than a pyramid scheme, and the constant drumbeat of negativity eventually got to Cramer. But CEO Michael Johnson proved everyone wrong when his company beat the Street’s earnings estimates by 16 cents a share. Plus, Johnson offered better-than-expected guidance for the fourth quarter and 2010 as well.
A now-humbled Cramer wants to turn bullish on Herbalife, saying he likes the stock more than competitors Avon [AVP
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], Tupperware Brands [TUP
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] and Nutrisystem [NTRI
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]. Not only has HLF returned 148% over the past five years – second only to TUP’s 155% – but also it’s the least expensive of the group, trading at just 11 times 2010 earnings. TUP, with its 13.8 price-to-earnings multiple, is the next cheapest.
Herbalife hit a 52-week high on Tuesday, and Cramer wanted to know if the stock was still worth buying. So he invited CEO Johnson onto Mad Money to find out. Watch the video for the full interview.
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