Buy Herbalife! Ackman's Foresight Under Fire Following JCPenney (JCP) Shakeup

April 9, 2013 7:35 AM EDT
Does Pershing Square's Bill Ackman still have the magic touch?

Following the ouster of Ron Johnson as CEO of JCPenney (NYSE: JCP) on Monday night, some are asking hedge fund giant Bill Ackman what his thought's are on the situation. Unfortunately, Ackman isn't talking right now.

The NY Post, which has been vocal on JCPenney and its problems since at least the start of 2013, points to one JCPenney insider who said, "Ackman is looking pretty foolish, as he is the guy who was beating the drum to get rid of Ullman in the first place."

Shares of JCPenney are lower amid the move due to Mike Ullman retaking the role of CEO at JCPenney. Ullman joined JCPenney in 2004 and was largely criticized for failing to secure a deal with Ralph Lauren (NYSE: RL) for an exclusive line of home goods under the "American Living" moniker. The last three years of Ullman's tenor were largely forgettable.

Back to Ackman. He has been vocal on at least two positions over the last 12 months: JCPenney and Herbalife (NYSE: HLF). Ackman said he was short $1 billion of Herbalife stock back in December, which immediately caused a sharp drop in the stock price through the rest of the month. However, since January, shares of Herbalife have been rather stagnant, getting a boost as activist investor Carl Icahn and Third Point's Dan Loeb took positions in the company. Icahn might have just wanted to break Ackman's short, while Loeb might have also saw value where Ackman didn't.

In any case, no one can bat 1.000 all the time. Pershing Square was last reported to be up about 6 percent in Q113 amid JCPenney's dip and Herbalife's lack of one. By comparison, the S&P 500 ended the first-quarter up about 10 percent.

So, is now the time to buy into Herbalife? Maybe. At this time last year, shares were trading above $70, versus Monday's close at $38.39.

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