Investors Brace for Epic Herbalife (HLF) Short Squeeze
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Bears have had a tough year, and it has gotten worse in recent weeks with shorts getting squeezed left and right. As a result a large number of stocks with a greater than 20% short interest have been on an absolute tear. While there may not be a clear explanation for the phenomena, there is no doubt it exists, and it may simply be related to generally bullish spirits.
After massive rallies in Netflix (Nasdaq: NFLX), Green Mountain Coffee (Nasdaq: GMCR), and Tesla (Nasdaq: TSLA), traders soon set their sights on depressed names in the solar sector, with shares of First Solar (NASDAQ: FLSR), JA Solar (NASDAQ: JASO), Sunpower (Nasdaq: SPWR), Solar City (Nasdaq: SCTY), LDK (NYSE: LDK) and others flying higher. Now it seems the market is focused on the mother ship, Herbalife (Nasdaq: HLF).
Herbalife drew interest last year when hedge fund manager Bill Ackman announced a massive short position in the stock. Ackman argued Herbalife was a pyramid scheme" and that the stock was worthless. Rival investor Carl Icahn countered Ackman, claiming his arguments were misguided. Icahn came to an agreement with the company to nominate two to the board and increase his position in Herbalife up to 25% of the outstanding common stock. This set the stage for what Icahn and others said could be the "mother of all short squeezes".
On Monday, Herbalife stock climbed nearly 11%. This caught the attention of traders and volume picked up on Tuesday morning. For now, shares are only modestly higher, but many on the Street are wondering if an epic Herbalife squeeze is in the works.
The most memorable short squeezes of all time is the one involving Volkswagen. In the fall of 2008, after Porsche announced that it controlled nearly all the shares, Volkswagen briefly became the most valuable company in the world after a short squeeze drove shares from €210.85 to over €1000 in less than two days.
After massive rallies in Netflix (Nasdaq: NFLX), Green Mountain Coffee (Nasdaq: GMCR), and Tesla (Nasdaq: TSLA), traders soon set their sights on depressed names in the solar sector, with shares of First Solar (NASDAQ: FLSR), JA Solar (NASDAQ: JASO), Sunpower (Nasdaq: SPWR), Solar City (Nasdaq: SCTY), LDK (NYSE: LDK) and others flying higher. Now it seems the market is focused on the mother ship, Herbalife (Nasdaq: HLF).
Herbalife drew interest last year when hedge fund manager Bill Ackman announced a massive short position in the stock. Ackman argued Herbalife was a pyramid scheme" and that the stock was worthless. Rival investor Carl Icahn countered Ackman, claiming his arguments were misguided. Icahn came to an agreement with the company to nominate two to the board and increase his position in Herbalife up to 25% of the outstanding common stock. This set the stage for what Icahn and others said could be the "mother of all short squeezes".
On Monday, Herbalife stock climbed nearly 11%. This caught the attention of traders and volume picked up on Tuesday morning. For now, shares are only modestly higher, but many on the Street are wondering if an epic Herbalife squeeze is in the works.
The most memorable short squeezes of all time is the one involving Volkswagen. In the fall of 2008, after Porsche announced that it controlled nearly all the shares, Volkswagen briefly became the most valuable company in the world after a short squeeze drove shares from €210.85 to over €1000 in less than two days.
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