One of Fidelity Investments' top stock pickers cooled on Herbalife Ltd. in the third quarter, cutting his stake in the company after a profit miss and fresh allegations from billionaire investor William Ackman that it is a fraud.
Steve Wymer, who runs the $41 billion Fidelity Growth Company Fund disclosed reducing his stake in Herbalife in a third-quarter commentary letter released this week. Wymer's fund is a long-time investor in Herbalife, counting it as a top 10 holding in 2011.
But Herbalife's stock lost 32 percent during the quarter, hurting the fund's performance more than any other name, Wymer acknowledged.
Wymer did not say how many shares he sold during the third quarter. But at the end of August his fund owned 4.53 million shares after selling 730,000 shares that month, according to fund disclosures.
Wymer is one of the best stock pickers in the mutual fund industry. His fund has generated a 10-year annualized return of 11.33 percent, beating 97 percent of peers and besting the S&P 500 Index by more than 3 percentage points during that period, according to Morningstar Inc.
Wymer's pullback could signal a wider shift of opinion among fund managers who will be releasing their third-quarter holdings next month. His fund's total return so far this year is 6.36 percent, slightly lagging the S&P 500's 6.74 percent advance. Still, the fund is beating 83 percent of peers as of Oct. 21.
Fidelity funds ranked as Herbalife's No. 2 investor after Carl Icahn at the end of the second quarter.
Herbalife bulls including Icahn, George Soros and Bill Stiritz have been facing off against Ackman ever since the hedge fund manager publicly announced his $1 billion short bet against Herbalife nearly two years ago and accused the company of running a pyramid scheme. Herbalife denies it runs a pyramid scheme.
In his fund's commentary, Wymer notes that Ackman further critiqued Herbalife in an hours-long presentation in July which preceded disappointing financial news from the company. For the first time since 2008, Herbalife missed quarterly earnings. It also cut its full-year revenue forecast, increased debt and reported a decline in cash on its balance sheet during the quarter.
While Herbalife's stock price has climbed 170 percent in the past five years, when it was a favorite in many investment portfolios, it has fallen 36 percent in 2014 and traded Wednesday at $50.50 on the New York Stock Exchange.
© 2021 Thomson/Reuters. All rights reserved.