We spoke about the issue with David Einhorn getting on the Herbalife (HLF) conference call a few days ago. Some people tried to 'catch a bottom' in the stock since it had fallen so much. I cannot stress enough how this guy is respected as a short seller and even IF HE WAS EVENTUALLY WRONG it does not matter – it will cause panic in the stock and more importantly OTHER INSTITUTIONS to attack. This is playing out. Further, yesterday's disaster in Green Mountain Roasters (GMCR) – another Einhorn target – is "piling on". Yes, eventually this stock is going to have a massive oversold bounce … and for all I know there is not one issue with the business. But none of that matters in the near term – no reason to be a hero when there are thousands of stocks out there.
HLF has now given back the entire October-April run in 3 sessions. For those who use support levels, I would assume some people try long side bets against that long term support. Have fun
That said, it is scary to think that your stock can drop 20% in a minute if David Einhorn gets on a conference call – it can happen at any moment to any stock.
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund's holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog