Herbalife (NYSE:HLF) Squeezing Shorts
Shares of Herbalife (HLF, $64.45, up $3.88) are getting a nice pop today after the company reported earnings on Monday's close. The stock was pushing $65 in after-hours trading and finished north of $63 and those gains have held and then some after Herbalife's numbers came in better than expected.
The company reported 2Q profits of $1.41 a share on revenue of $1.2 billion versus the suit-and-ties forecast for $1.18 a share on sales of $1.16 billion.
Herbalife also raised its outlook for the year to $4.83-$4.95 a share, up from a previous forecast of $4.60-$4.80 a share. Wall Street was looking for $4.80 a share for 2013. However, the company said current quarter profits would come in at $1.09-$1.13 a share versus consensus estimates for $1.16.
Overall, it was a great quarter for Herbalife and the short squeeze has been costly for some investors, a windfall for others.
We tried getting on the Herbalife train in mid-January when shares were in the low $40's but we were a little early on our run past $50. We made the mistake of not giving the trade enough time to work out and got nailed from the then developing feud between Carl and Bill. We were smothered when shares fell to a low of $30 and we were forced out with a nasty loss.
We recommended the February 50 calls and by the time they expired, shares had established a range between $35-$40. We aren't sure what the Herbalife August 50 calls (HLF130817C00050000, $14.25, up $2.75) were trading for at the time but they couldn't have been much more than a buck or $2.
The August 60 calls (HLF130817C00060000, $6.00, up $1.20) came into the week at $3.60 and were up $1.20 on Monday's close. Today, they have reached a peak of $7.25 and this would have been a nice triple-digit return in 2 days.
As far as the market, the trading we have been talking about is still taking shape but the rest of the week is filled with economic goodies that could lead to another breakout, or, a possible breakdown.
The Dow is up 21 points to 15,543 while the S&P 500 is higher by 4 points to 1,689. The Nasdaq is advancing 25 points to 3,624.
We have a New Trade we are recommending so let's get on it. Subscribers, check the Members Area for the updates.