“How Credible is Analyst Tim Ramey?” by Mohan Venigalla

(QTR’s Note: I’m publishing this piece for Mohan Venigalla, a friend of mine who has been instrumental in pointing out many of the issues behind NUS. He has a “PRO” article coming off of Seeking Alpha embargo tomorrow about Nu Skin’s latest report that I recommend checking out.)


Tim Ramey (Pivotal) is an uber bull on multi level marketing companies Herbalife, Nu Skin and USANA. He is not only still bullish on Nu Skin, he raised earnings expectations for FY14 to $4.15 from $4.10, which was his estimate before the latest earnings report from Nu Skin. Furthermore, in a recent research note after the earnings release, Ramey argued that the company is not burning cash and the recent borrowing was not because of cash burn.

The following balance sheet and cash flow statements are from Nu Skin’s latest 10-Q filing.


I am not an accountant, but I can put these two statements together. Company claims to have $194 mm cash on hand. Let us assume the cash is real and easily repatriable – as the Company claims. Its operations burned about $330mm in 9 months, or $110 mm / quarter, has $328mm accrued expenses. The dividend payment during 4Q is to the tune of about $20mm.  This sure looks like cash burn to me.

Ramey’s indicates that the Company has an excess cash of $100 million – thanks to the recently closed 5-year revolving credit facility. He said that the company could use this cash to repurchase shares under a previous authorization. They could do it and they may even do that. But, given the recent troubles with cash flow and mini debt crises faced by Nu Skin, will a buyback be prudent management of cash? How quickly we forget – early this year Nu Skin was buying shares above $120/share. As of this writing, NUS is trading in the low 40s.


Let me put some recent developments in perspective to let you decide on the credibility of Tim Ramey’s “research.” First things first, both Nu Skin and Herbalife have to thank Ramey immensely for his frothy reports that took HLF and NUS share prices higher before earnings. The ensuing drops following disastrous earning reports brought the share prices close to only pre-runup levels.

Following HLF earnings, Ramey reduced price target for HLF from $110 to $75 and still maintained a buy. He also updated his report on NUS after the earnings and during the trading day on Nov. 5th. While his opinion on HLF didn’t seem to matter as HLF continued its slide for the second day, his update on NUS may have cushioned the NUS stock price drop.

Recently Ramey claimed that Herbalife will settle with FTC, a line Herbalife itself floated via a report by Charlie Gasparino on Fox Business News. He also issued a $110 target and his FTC settlement talk helped HLF shares catapult from the mid 40s to as high as 56 in a few short days. Ramey touted a potentially huge growth in Herbalife China business. In fact, Herbalife China sales shrank by 17% YoY during the latest quarter.


In a recent appearance on CNBC, John DeSimone, CFO of Herbalife has back-pedalled on the talk of any settlement with FTC in a very convoluted manner.

I believe Tim Ramey’s research is anything but objective. Though there is no evidence that neither Herbalife nor Nu Skin have paid Ramey to issue favorable reports, there is a direct connection between Tim Ramey and Herbalife.

In an interview related to Herbalife, Melissa Lee of CNBC exposed Tim Ramey for the paid shill he is. Watch this CNBC Video in full to witness his shallow analysis of Herbalife. Pay particular attention form the 1:45 minute mark where Melissa Lee confronts Ramey about his conflict of interest as a research analyst.


Melissa Lee, “Tim I got to ask you this as well. You used to work with DE Davidson and you are know as one of the biggest Herbalife bulls on Wall Street. You’ve been on Wall Street for quite sometime. Right now you are working for Pivotal. But you are also getting a pay check essentially from one of Herbalife shareholders (Bill Stiritz). Do you actually consider yourself as an objective research analyst at this point? Are you being paid for this rating?”

Ramey: “Not at all.”

Melissa Lee, “Not at all? Even though you are getting a paycheck from Post?”

Ramey, “That’s true. But Post has nothing to do with Herbalife.”

After this exchange with Melissa Lee, Ramey’s research note on HLF included the following disclosure (hat-tip to Jacob Wolinsky):


I congratulate Melissa Lee for the excellent display of financial journalism.

As with the credibility of Ramey’s research, I will leave it up to the reader to decide.

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