Despite more allegations of wrongdoing by hedge fund manager Bill Ackman -- who has a rather sizable short position in the name -- the stock opened relatively strong. In fact, by 11:00 a.m. EDT, shares were higher by as much as 5%, to $69.
A few hours later, the first big headline appeared: Shares of HLF, HALTED.
For an active trader, the word "halted" is one of the worst in the world. You're locked into a position that you have no way of exiting or hedging until it is resumes trading.Usually, when the security resumes trading, it's messy action and the trader either gets crushed, or makes a fortune. A real world coin toss. Shares of Herbalife proved no different, plunging down to $54, more than 20% off session highs. Then shares reversed higher by $6 from there, finally ending the day at $60.57. In mid-morning trading Thursday, shares were down about 5% at $57.60 on the Nasdaq. Wednesday was crazy. But in the ensuing year, it's only likely to get crazier.
Traders are going to be all over this thing. And why wouldn't they be? It's a trader's paradise. Herablife is a very volatile stock, and has huge price swing potential. But for an investor, is it really something you want to be in, long or short? I guess you have to ask yourself, How much conviction do I have? If you truly believe the company is a pyramid scheme that will literally be shutdown, then I guess you could stay short. If you believe that the opposite is true, and the stock is undervalued, then I suppose you could stay long.
But seriously, how much conviction could you possibly have? If you're not a wealthy fund manager with plenty of connections or have enough money to investigate for yourself, how can you truly pick a side, with 100% accuracy?
Simply put: You can't. For me, man, there are so many other stocks I'd rather be in before Herbalife. Even if it is an undervalued, non-pyramid scheming company. Look at shares of Google (GOOG), Celgene (CELG), Under Armour (UA), Michael Kors (KORS), and Facebook (FB).
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
DISCLOSURE: At the time of publication, the author was long Facebook. -- Written by Bret Kenwell in Petoskey, Mich. Follow @BretKenwell This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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