Herbalife Ltd. (HLF) Now A Hot Hedge Fund Short


Short interest in Herbalife Ltd. (NYSE:HLF) was riding high even before the company reported third quarter earnings that missed expectations. As of the end of Q3, 33% of Herbalife’s shares were out on loan, compared to a 25% short interest reported at the end of second quarter. 

Stocks with highest short interest Herbalife

Herbalife among top ten most shorted

According to Goldman Sachs’ Hedge Fund Trend Monitor, a quarterly report, Herbalife Ltd. (NYSE:HLF) is once again among the top ten most shorted stocks. Following Bill Ackman’s public short attack in December 2012, Herbalife almost doubled, making it a painful short call. However, now the stock that caused clashes among hedge fund titans has dropped back to a much humbler share price. The nutrition supplements company lowered guidance for the current fiscal year and next year in the latest earnings call. Herbalife also showed much lower sales growth than was expected. The new compliance framework that the company recently adopted is taking toll on growth and has triggered multiple falls in share price over the year. The decline has hurt long holders of the company, including Carl Icahn, Perry Corp and Soros Fund. On the short side, what was once an almost ‘exclusive’ Bill Ackman short seems to have attracted other funds. It is possible that a large percentage of the float is no longer held by Pershing Square as Ackman has restructured his short bet.

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Transocean short interest leaps to 22%

A dramatic change in short interest took place at Transocean LTD (NYSE:RIG) as well, shooting up to 22% of equity cap from 15% in the previous quarter. Fewer rig contracts have made for a difficult environment for the oil and gas driller. Here again, Icahn is holding a huge chunk of shares, 21 million shares. Transocean has fallen nearly 50% this year so far.

Post Holdings and Cliff Natural reward shortsellers

Post Holdings Inc (NYSE:POST), a packaged goods company, is also facing extra heat from short-sellers. Post Holdings was headed by well-known Bill Stiritz until October of this year.

A new entrant in the top 50 list, POST has 26% of its shares out on loan this quarter compared to 18% in the second quarter. A fruitful short bet, shares of Post Holdings have declined 25% YTD, where most of loss came in the third quarter. On the long side, those who have been hurt by the decline are John Paulson, Blue Ridge Capital, Adage Capital and Discovery Capital.

Cliffs Natural Resources Inc (NYSE:CLF), the mining and minerals company, also experienced a significant change in short interest, up from 32% of equity cap in Q2 to 39% in Q3. With a nearly 65% fall in share price YTD, CLF has been a profitable short so far.

Short interest in CONN’S, Inc. (NASDAQ:CONN), a retailer of electronics and home appliances, rose from 23% in Q2 to 34% in Q3. Shares of the company have lost over 50% this year.

Tech companies face heat from shortsellers

Zulily Inc (NASDAQ:ZU), an online retailer, has landed among the top three stocks with highest short interest. Zulily had shares worth 38% of its equity cap out on loan at the end of September. This is giant leap from just 11% short interest at the end of Q2.

The newly listed GoPro Inc (NASDAQ:GPRO) has amassed an impressive short interest in a limited period of time. According to Goldman, 32% of GPRO’s shares were held in short positions as of the end of September. GoPro started trading in mid-2014.

Short interest reduces in Mallinckrodt

Stocks where short interest fell significantly include Mallinckrodt PLC (NYSE:MNK) which recently completed the acquisition of Questcor Pharmaceuticals Inc (NASDAQ:QCOR).  Short interest is now at 11%, compared to 27% at the end of second quarter. Mallinckrodt, a specialized pharmaceuticals company, now has 24% of its equity cap owned by hedge funds,down from 91% at the end of June quarter.

Trulia Inc (NYSE:TRLA), a search engine for the real estate market, also experienced a lot of covering of short positions. Short interest in Truila is down from 33% in June to 21% at the end of third quarter.

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