…there’s usually fire. For those who have been following the HLF trades on the site lately, you’ll recall that the last update was made just a few days ago when the 2nd short trade hit T2 for another 19% gain following the 24% gain on the previous short trade that was closed out about 1 month ago today. As a bounce off T2 this week was expected, I suggested booking partial profits or full and the stock has since bounced nearly 20% in just the three days since that last update. However, I think that the time has come to recycle some or all of those funds back into HLF around current levels (HLF is trading at 40.86 as I type) as something’s rotten in the state of Denmark, or shall I say Icahnville?
I do not know all of the specifics on what Carl Icahn’s current stake in the company is or exactly how much of his stake is held through Icahn Enterprises (IEP) although I believe that IEP will be the primary beneficiary of most, if not all, of the profits or losses on Icahn’s HLF venture. I can not continue to reiterate enough that this trade is only for aggressive & nimble traders and as always, DYODD (do your own due diligence) on any trade or investment that you decide to engage in. You can click here to view the “supposed” reason for the 12%+ gap down in IEP today (but no mention of the fact that the stock is down over 30% since it’s recent highs in mid-Feb.
One could spend countless hours researching what Icahn’s latest position is in the stock and do their best to interpret his true intentions but the simple fact is that fundamental analysis is akin to driving a car while looking in the rear-view mirror. By the time the required SEC and other disclosure forms are released, Icahn’s position will almost certain have changed (as well as Ackman’s, or anyone else’s, for that matter). Ditto holds true when analyzing a companies fundamentals based on common metrics such as earnings, revenues, expenses, etc…. This information is typically up to 4 months old by the time it is released to the public (1 month lag +/- on the last quarterly (3 month) results). That is why I will almost always put much more stock (pun intended) into the charts (technical analysis).
With that being said, it is this recent disconnect between the stock prices of HLF & IEP. As you can see from these daily & 60 minute charts, IEP was pretty much a “dead money” stock for years now, only just recently coming back to a level not seen since 2008. All of a sudden, IEP started going parabolic just before the public announcement of Icahn’s strategic short-squeeze plan to burn Bill Ackman. As the zoomed in 60 minute chart shows, IEP & HLF has traded in a near-perfect correlation since then until very recently. Btw- Those two board members that Icahn had appointed to HLF’s board came from IEP (no surprise really). My reasoning for re-shorting HLF is largely due to this potential “tell” in IEP but more so for other reasons that I may comment on later, time permitting.