Is Herbalife a Bad News Buy?

Herbalife , the notorious battleground stock with dueling activist investors (Bill Ackman on the bear side, Carl Icahn on the bull team), has been embroiled in new controversy over the past few weeks, as the battle over whether it is a "pyramid scheme" has heated up. A series of agencies, including the Federal Trade Commission, the Federal Bureau of Investigation, and the Department of Justice, have recently opened investigations. More recently, those agencies were joined by New York Attorney General Eric Schneiderman and Illinois Attorney General Lisa Madigan, and, earlier this week, a shareholder filed a class action lawsuit claiming that he bought the stock at inflated prices because the company misinformed him by not disclosing that it is a pyramid scheme (whether or not that is true is, of course, up for debate).

Without knowing the evidence, it's hard to know what to do in the face of all of these probes and lawsuits. In this video, Motley Fool health care analysts David Williamson and Michael Douglass discuss why investors may want to remain safely on the sidelines until these issues are resolved.

Even if Herbalife continues its great run and successfully navigates all of the investigations its under, it may still have serious trouble keeping up with this top stock.
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The article Is Herbalife a Bad News Buy? originally appeared on

David Williamson has no position in any stocks mentioned. Michael Douglass has no position in any stocks mentioned. The Motley Fool has the following options: long January 2016 $57 calls on Herbalife. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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