Herbalife Ltd. (HLF) Finds Life Amid Ackman-Valeant Debacle

Herbalife Ltd. (HLF) is heading to the upside after the company bashed activist investor Bill Ackman

Oct 30, 2015 at 2:30 PM
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The drama's really picked up on Wall Street today, and maybe unsurprisingly, activist investor Bill Ackman is at the center of it. Specifically, Herbalife Ltd. (NYSE:HLF) is moving higher today, last seen up 4.9% at $56.24, after the company released a statement ridiculing Ackman for his investment in tanking Valeant Pharmaceuticals Intl Inc (NYSE:VRX). Of course, Ackman has famously shorted HLF, but it's continued to outperform, now up over 49% in 2015. 

The latest twist came earlier today, just after Ackman held a conference call concerning his investment in VRX. Citron Research, the firm that released a devastating short-seller report on the drugmaker, went to Twitter to offer its two cents on the situation. 

It seems this spectacle is far from over. As for HLF specifically, it could inflict some more short-term pain for Ackman, if option bears head for the exits amid these gains. Looking at data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio stands at 3.78. Not only does this mean nearly four puts have been bought to open for every call during the past two weeks, but the reading stands higher than 95% of all similar readings from the past 12 months. In short, put buying has been much more popular than normal. 

Making matters worse for Ackman, Herbalife Ltd. (NYSE:HLF) may have found a home atop its 100-day moving average -- the same trendline that sparked the shares' run to annual highs in early August. To add yet another potential catalyst to this story, HLF will unveil earnings after the close next Tuesday, and it's been an absolute post-event beast of late -- surging 17.2% in the session subsequent to its early August report, for example.


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