[rafaeleirene:189] Mad Money Recap An Herbal Remedy? | Nightly Recap for: Wednesday, May 12,2010
Rafael A. Vilagut
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| Wednesday, May 12,2010 |
Jim: Even though the market has rallied amazingly this week… there are still some bargains to be found from last week’s awful sell off… stocks that should be much higher but aren’t because of the collateral damage caused by all of the panicked selling…
Take Herbalife Ltd. (HLF)... which sells nutritional supplements and weight management products thru multi level marketing and direct selling.. or to translate from authentic Wall Street jibberish, Herbalife is kind of like an Avon or Tupperware for vitamins.
Herbalife reported a big upside surprise after the close last Monday May 3rd… delivering earnings of .98 cents per share… .17 cents beat… 19% increase in sales… how much do we love double digit increases? Raised guidance for the full year as well as adding $750m to the companies mammoth buy back… essentially at Herbalife’s current levels, you are getting the companies great quarter for free…
This is not reflected in the darn share price.. we have got to learn more about the companies progress and growing the business, and returning cash to shareholders… how much do we like that on Mad Money? So let’s hear from Michael Johnson, the Chairman and CEO of Herbalife Ltd. (HLF)…
Jim: Mr. Johnson, welcome back to Mad Money. You continue to deliver...
Michael: Hi, Jim.
Jim: Okay, I saw growth in the US market that I have not seen in some time. What has happened so that you have got tremendous growth at home?
Michael: Well, the Latino side of our market has been powering for the last 6 or 7 years. They have adopted
this daily consumption model of selling the product to people in social atmosphere.
Jim: I know, I was just going to ask you about it. This has become a social media business without the media.
Michael: It is very interesting but what has happened is, is our general market has latched onto what the Latin’s are doing. There is a little pressure there. There is a little competition between them when they see a lot of meetings, they see things taking place in the marketplace. So they are putting weight loss challenges into their clubs. They are opening up home offices that have people come in the morning to try a few shakes, introduce them to the products, the business opportunity. Put a weight loss challenge in in the afternoon. So they work a 12 hour day like you and I work. And they are building an incredible business and it is taking hold. We are starting to see people move up. New energy in the US general market, it is fabulous.
Jim: You mentioned a key term which is the weight loss. I now in the time that I have now known you, which you have basically said, there was a Herbalife, it was an okay company, I have come in and we are trying to reinvent it. You have now turned this into an anti-obesity company and you have also Dr. Bill Frankos, who is the FDA’s former Director of Division of Dietary Supplement. This has become a company that is a catalyst to try to get people to try to lose weight.
Michael: Well, we like to tell our distributors that we are in this incredible intersection of health and wealth. We have an opportunity for people to make a little money. A little or a lot, depending on how hard they want to work. And we have this obesity issue, and you can pick up any periodical, Time, the New York Times magazines last week. And that huge article in the Wall Street Journal Saturday edition. It is sad what is happening. We have got an answer for that and we have got an answer with a daily nutrition meal. 220 calorie meal right in here. And I always get a kick, you know a burger, fries, and a soda are 1400 calories. Full of some pretty negative things in there. And that is a meal. We are a meal replacement but we are healthier, we are building a better product. So we brought Frankos in to help us in many ways. One, look at our ingredients very carefully. We have gone into vertical integration, we bought our own facilities, we are building our own ingredients manufacturing and supply chain out of China. We are going into the fields to make sure that our crops are good. And Frankos is going to help us along every step. He is a former FDA guy, and he knows what is going on.
Jim: I had this idea. Not in the in the business plan, but I have been thinking. Why don’t you take that model to all of the schools in America. Because in the conference call you talk about the burger, fries, you know the kids do not eat well. Isn’t this a possible solution? I know that you would only go mid level, but maybe we just change the model and also go into the schools.
Michael: It is a great idea. And look at the politics and the economies behind those soda machines and all of those things that are in the schools. It is pretty sad what is happening there. And when I hear things, well we are negotiating to get the soda machines out by 2012. You are going, what about now?
Jim: When are they taking the smoking machines out?
Michael. What about now? And so our distributors have the opportunity to do that. That initiative would take a corporate to government relationship and that… our business is built from corporate to distributors. From distributors to consumers.
Jim: I know, but I thought it would be a game changer. How can you have 78% growth in Korea? What is that about?
Michael: Well, it is this daily consumption. It is the clubs that are being built there. It is the Koreans who are very innovative and very entrepreneurial, who work very hard. And these distributors are building an incredible business. And they are doing all sorts of things. They have sauna chairs, they have pilates, they might have book readings taking place. It is a very social network that is taking place inside this business. And so they come, they have nutrition, they spend some time together. It is fabulous.
Jim: India too?
Michael: India is the one that I just want to say, stay tuned. Things are going to get interesting.
Jim: Alright, in the minute that we have left. You are doing something that I have not seen since the old days. You are buying back more stock than any company that I have seen. Is that a prelude to something/ Because I know that this company was not always public.
Michael: Well, I do not know how you buy a company back.
Jim: Give me a break. This is not some idle buy back.
Michael: Well, here it is. We are vertically integrating. We are spending a ton of money on doing things that we need to do to ensure our distributors, our consumers that we have got the best product on the face of the earth. That is important to us. Secondly, we are spinning off a ton of cash. What do you do with that cash? You have got to return it to the owners.
Jim: Well, that is what you do. That is why I like this stock. That is why you have been a big winner for Mad Money. That is why I am thankful that Michael Johnson, Chairman and CEO of Herbalife before he goes to his big Singapore conference. 15,000 people.
Michael: We are going to see 15,000 in Singapore on Thursday and Friday. enlace: http://www.cnbc.com/id/15840232?video=1492336965&play=1 y http://www.madmoneyrecap.com/madmoney_nightlyrecap_100512_5.htm
BEST WISHES AND KIND REGARDS, Rafael A. Vilagut, Independent Distribuitor Herbalife
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