Herbalife Gains A Big Friend In Robert Chapman As Bullish Momentum Rises

(This is an excerpt from an article I originally published on Seeking Alpha on January 4, 2013. Click here to read the entire piece.)

{snip} This reversal was punctuated by Chapman Capital’s Robert Chapman revelations on January 3rd that he bought HLF on the cheap to trade directly against Ackman.


HLF quickly reverses much of previous bearish momentum
HLF quickly reverses much of previous bearish momentum

Source: FreeStockCharts.com

Herb Greenberg of CNBC got the interview with Chapman on Thursday, January 3rd. Greenberg next discussed his interview with the CNBC crew.



While Greenberg is a skeptic of Chapman’s trading thesis and a skeptic of HLF, I am fascinated by Chapman’s approach. Just as Ackman saw an opportunity to go after a company vulnerable to his charges and media hype, Chapman now sees an opportunity to do the same to Ackman. So far, it is succeeding.

On December 29th, Chapman wrote a letter to his investors titled “Herbalife: Why I Made It a 35% Position after the Bill Ackman Bear Raid” (Greenberg linked to it in his article on CNBC). I highly recommend you read it before you consider trying to ride the coattails of either Ackman or Chapman. Chapman matches Ackman’s brilliance here. {snip}

I will not review Ackman’s rebuttal, especially since HLF will provide its own next week. Instead, I am more focused on Chapman’s valuation estimation and price targets. {snip}

Chapman provides a primer on short-selling describing how Ackman has put his fund at serious risk with the tremendous size of his position. {snip}

{snip} Here are the highlights I have picked up from the options trading in HLF {snip}

What sticks out of course is that the daily trading was much more bullish than open interest EXCEPT for the May expiration. {snip}

The very bullish trading in options expiring next week is quite telling. {snip}

Overall, the generally bullish tone in the options trading continues the very steep downward trend in the open interest put/call ratio that began after Ackman’s presentation. {snip}

HLF has now turned into an epic battle of giants. {snip}


Shares short against HLF soared 72% in the six weeks through December 14, 2012
Shares short against HLF soared 72% in the six weeks through December 14, 2012

Source: NASDAQ.com

Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on January 4, 2013. Click here to read the entire piece.)

Full disclosure: long HLF and short HLF puts

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