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Hedge Funds Play ‘Jeopardy’ Over Herbalife

Wall Street Journal – “Who Wants to be a Millionaire?”

Hedge-fund manager Bill Ackman appropriated the title of the game show for a presentation labeling multilevel marketing firm Herbalife Ltd. HLF +1.35% a “pyramid scheme,” a charge the company disputes vigorously. Rather than joining him in selling shares of the stock short, though, fellow activist investors Dan Loeb and Carl Icahn seemingly drew inspiration from another classic: “The Price is Right.”

The fight involving Herbalife’s stock is a stalemate for now, but Monday’s first-quarter earnings could tip the scales toward those who see it as an investment opportunity. Earnings are seen at $1.06 a share versus 88 cents a year earlier, according to FactSet.

In fact, since hedge-fund manager David Einhorn sent the stock reeling a year ago with skeptical questions on an Herbalife analyst call, earnings expectations for 2013 have risen steadily. The stock’s prospective price-to-earnings ratio was nearly 19 times then and is just 7.8 times today.

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