Tim Ramey has been so quiet lately that we wondered if something was up. As noted in a prior article, the food, beverage, and nutrition industries analyst at DA Davidson seems to find ways to create news regarding Herbalife Ltd. (NYSE:HLF) even when there is seemingly little (or no) news on the topic.  However, the analyst at DA Davidson is out with a new report tonight. In the report he focuses on three MLMs, but devotes most of the note to Herbalife Ltd. (NYSE:HLF) and attacking Bill Ackman. For further context on that topic see Herbalife Leveraged Recap Likely, MLM Controversy Over: Tim Ramey and Bill Ackman Attacks Herbalife analyst, Explains J.C. Penney Sale

Herbalife LTD. HLF

Below is an excerpt of Ramey’s report dealing with Herbalife.

The three MLMs under our coverage continue their streak of outperformance, in both stock price and fundamental performance. Year-to-date, Nu Skin Enterprises, Inc. (NYSE:NUS) is up 251%, Herbalife is up 130%, and USANA Health Sciences, Inc. (NYSE:USNA) is up 120%; and both NUS and HLF made new highs today. For reference, the S&P and Russell 2000 are up 25% and 32%, respectively. We believe this outperformance reflects the market’s validation of the MLM business model, despite continued, albeit waning, pressure from short sellers.
Data as of 11/15/13 indicates short interest for each MLM increased slightly. Compared to the prior month data as of 10/15/13, Herbalife’s short interest grew 1.8% to 18.8% of shares outstanding, Nu Skin’s short interest grew 17.2% to 3.0% of shares outstanding, and USANA’s short interest grew 1.1% to 13.4% of shares outstanding. In our opinion, these minor increases were in anticipation of Pershing Square’s latest attack on Herbalife, referenced below.

Pershing Square CEO Bill Ackman renewed his critique of Herbalife’s business model while speaking at the Robin Hood Conference on November 22nd. We note that he, again, affirmed that he will take this battle “to the end of the Earth.” A Google search of the term “the end of the Earth” produces a page-one rank of #8 for Ackman’s pledge. That is a pretty heady billing for a statement that has nothing to do with the end of the Earth.

Mr. Ackman’s presentation proved to be quite a boost to the shares given its failure to prove his central thesis of “illegal pyramid scheme.” Ackman’s presentation pointed to the inconclusive nature of his charge; the market agreed as HLF’s stock rose 5.9% on 11/22. The next major event will likely be the much-anticipated re-audited financials coming from PwC by the end of the year. This could serve as the proverbial “nail in the coffin” for short sellers. The end of their Earth.
Herbalife in compliance with Belgian law. Today a Belgian Appeal Court judgment was provided that states the company’s sales are in full compliance with Belgian law. This judgment overturns a previous ruling by the lower court that Herbalife was operating a pyramid scheme. Herbalife asserts the first judgment contained several factual errors and misrepresentations of direct-selling. This ruling is significant as this was the only court in the world that judged Herbalife to be an illegal pyramid scheme. Another reinforcement of the legitimacy of HLF’s business practices in the books.