Pershing Square's Ackman Caught Between Rock and Hard Place (HLF) (JCP)
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Pershing Square's Bill Ackman is having a terrible, horrible, no good, very bad day.
Exhibit A) Herbalife (NYSE: HLF) closed 3.6 percent higher on Wednesday and is now largely back to the same spot where it dropped in December on word that Ackman was short about 20 million shares. Last week, Herbalife even had the gall to report solid quarterly numbers.
Exhibit B) JCPenney (NYSE: JCP) is getting creamed Thursday morning following horrible fourth-quarter results issued last night. Both sales and comps fell over 30 percent in the quarter, causing shares to fall over 16 percent in pre-market trading. Ackman is long this stock and supports CEO Ron Johnson
The saving grace for Ackman is also twofold: For one, Herbalife retreated following a micro-run in February on disclosure that activist investor Carl Icahn took nearly a 13 percent long position. That means he didn't get squeezed out of his trade.
The second point is that JCPenney's drop today only means that comps moving forward should be getting easier. If Ron Johnson's plan of offering some promotions and discounts begins to take hold, shares may very well move back to the $30 level...or even higher. The thought isn't a complete impossibility, just look at the recent action in Nokia (NYSE: NOK) and BlackBerry (Nasdaq: BBRY) after investors all but wrote off the stocks. The slightest bit of good news drove shares higher after a while, despite no material change in overall results.
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Exhibit A) Herbalife (NYSE: HLF) closed 3.6 percent higher on Wednesday and is now largely back to the same spot where it dropped in December on word that Ackman was short about 20 million shares. Last week, Herbalife even had the gall to report solid quarterly numbers.
Exhibit B) JCPenney (NYSE: JCP) is getting creamed Thursday morning following horrible fourth-quarter results issued last night. Both sales and comps fell over 30 percent in the quarter, causing shares to fall over 16 percent in pre-market trading. Ackman is long this stock and supports CEO Ron Johnson
The saving grace for Ackman is also twofold: For one, Herbalife retreated following a micro-run in February on disclosure that activist investor Carl Icahn took nearly a 13 percent long position. That means he didn't get squeezed out of his trade.
The second point is that JCPenney's drop today only means that comps moving forward should be getting easier. If Ron Johnson's plan of offering some promotions and discounts begins to take hold, shares may very well move back to the $30 level...or even higher. The thought isn't a complete impossibility, just look at the recent action in Nokia (NYSE: NOK) and BlackBerry (Nasdaq: BBRY) after investors all but wrote off the stocks. The slightest bit of good news drove shares higher after a while, despite no material change in overall results.
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