'Mother of all Short Squeezes' Could Punish Ackman and Other Herbalife (HLF) Shorts

January 14, 2013 12:21 PM EST
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Price: $53.01 -0.24%

Rating Summary:
    6 Buy, 5 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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If DA Davidson's analyst Timothy Ramey is correct then Bill Ackman could be in big trouble with his Herbalife (NYSE: HLF) short bet.

Ramey predicts the Mother of all Short Squeezes (MOASS) in the stock. We're talking Volkswagen here folks.

The analyst notes a few things that could trigger the squeeze. First, he notes the stock is above the $42.50 mark, the price that shares were trading at prior to Mr. Ackman's December 20th presentation. Also, the likely events this week include a pre-release of Q4 earnings and a Dutch auction. On the pre-release, Ramey noted he spoke to with CFO John DeSimone about the pre-release last Thursday. Mr. DeSimone said he needed a little time to review the numbers, but his people had done the work already. If the company has "material non-public info (above and beyond the Q4 earnings)" in cannot proceed on its share repurchase. Given the fact that the Q4 earnings are "material" leads one to believe that HLF may exceed their own guidance, the analyst notes.

"If we see the pre-release and another large share repurchase, up to and including the $950 million remaining under the authorization, we predict MOASS – Mother of all Short Squeezes," Ramey states.

New NYSE short interest data showed that Herbalife had the largest percent change in short interest - up 11,0777,272 shares to 37,298,384 shares, or 35.1% of float.

The analyst reiterated his Buy rating and price target of $72, based 15.8x their 2013 estimate of $4.55.

For an analyst ratings summary and ratings history on Herbalife click here. For more ratings news on Herbalife click here.

Shares of Herbalife are up 8.2 percent to $43.29.

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