Dividends and When Wolves Bite

One of the wonderful aspects to the stock market is people can have different opinions and be right. People buy stock for multiple reasons although the top reason is to be worth more at the end of the day than the start. It is good to do your homework, make an investment and others agree with you. However sometimes you can do your homework and others disagree, if you were committing a billion dollars to your idea, you want to scream why does not everyone see what I see?

In the book. When the Wolves Bite by Scott Wapner published by Hachette Books, N Y, 2018 the wolves are two icons of Wall Street. Carl Icahn and William Ackman and the company they see differently is Herbalife.

William Ackman through his company Pershing Square Capital Management was short the stock. Carl Icahn was long and owned enough shares to be on the Board of Directors.

The men are in the hedge fund world, and lasted over 10 years through wins and when the win big, the wins are in the billions. Although sometimes they lose money, but usually it is not more than hundreds of millions.

Each of the investor spent time doing their homework, talking to the President as well as trying to figure out how does the company make money? Who buys the product?

At the time, Herbalife was a mixture of selling products to distributors who made money selling product and recruiting more distributors. Which one is more important? This is where the decision of the 2 investors was different.

Both companies hired lobbyists to sell their story to the public and equally important to the regulatory body of the government, in this case it was the Federal Trade Commission or FTC and its Chair. William Ackman wanted the FTC to say Herbalife was a pyramid scheme, Carl Icahn wanted the FTC to say it was a normal business but could be cleaned up a bit.

Linking to dividend paying stocks, a book such as this one shows some of the methods in which the players are linked. Often times they have met, crosses paths at conferences (some conferences are seemingly more important than others, depending which industry you invest in, it is important to know about them, in the book the Ira Sohn Conference was very important) worked together and worked apart from each other. On Wall Street good ideas are good ideas, how you profit from them is the question.

There are more questions than answers, till the next time – to raising questions.


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