John Hempton is bullish on Herbalife but bearish on coal

By Jennifer Ablan and Matthew Goldstein

Hedge fund manager and frequent blogger John Hempton is a little bit like the Jim Chanos of Australia.

Over the years, he’s been a fairly prescient short seller. For instance he was an early skeptic on computer giant Hewlett Packard and travel services company Universal Travel Group, which recently agreed to pay nearly $1 billion to settle a U.S. Securities and Exchange Commission lawsuit alleging that the company defrauded investors by failing to disclose the transfer of $41 million from stock offerings to unknown parties in China.

But unlike Chanos whose Kynikos Associates almost exclusively goes short—makes a bet a company’s share price will plummet because of fraud, unsustainable revenue growth or simply an unrealistic valuation—Hempton’s Bronte Capital also makes a fair bit of money on the long side as well.

In fact, Hempton was a bull on Bank of America back when it wasn’t fashionable in 2011 and many were predicting the big U.S. bank would never get out from under a sea of litigation over its exposures to Countrywide’s mountain of bad mortgages and collapsed securitizations. Today, Hempton likes to say it was a good call (His most profitable bets include Fannie Mae preferreds, Maguire preferred securities, put options on Longtop Financial Technologies and puts on China Agritech).

So it’s always been a little surprising to find Hempton as one of the early hedgies to take the other side of Bill Ackman, who went public late last year with his big $1 billion bet that nutritional supplement maker Herbalife is an unsustainable pyramid scheme that will collapse and see its stock plunge to zero. It’s no secret that things haven’t gone well for Ackman with Herbalife as his Pershing Square Capital Management has rung up about $300 million in papers losses. Billionaire investors Carl Icahn and George Soros have lined up against Ackman on Herbalife and earlier this year, outspoken hedge fund manager Dan Loeb scored a big profit for his Third Point fund by betting against Ackman as well.  (we will link to our story here)