Thursday, February 14, 2013


OK, if you are a fan of the stock market, you have been following the soap opera of Bill Ackman and Carl Icahn over Herbalife.  In short, Ackman is a bear that believes Herbalife is a scam, and Icahn thinks there is value.

But the real story is that Icahn and Ackman dislike each other personally over a bad deal from 10 years ago.  Fine, whatever, two giants fighting over a company.  As Josh Brown says, two Gods fighting above us, or as I say, Godzilla vs. Megalon.  As a small investor, they may not care about you, but you might get trampled if you get in their way.

So, don't overdo it, but my recommendation is to watch this stock slowly implode.  If you want to see the winner, don't look at what happened today.  Today the stock jumped 10 points after hours when Icahn raised his stake.

Look at the price over the last few months.  Before Ackman made his short known, the stock was in the 50s.  It dropped to around 25 and is now after hours around 47.  When did Icahn buy?  I would bet he averaged in when the stock was on the lower end of the range.  He had plenty of opporunity.

Do you think it is going back to the 50s again?  I don't.  I think it will pop up to something below 50 and slide back down, once all the headlines are done.

Ackman will have made his money, and Icahn will be able to get out with a winner too.  The people who followed them in late will get hurt.  And the big boys can share a laugh at all the small time losers.