HLF (Herbalife Ltd)
Herbalife is a fast growing weight management and nutritional supplement company. They operate using a direct marketing setup as customers become sales reps reducing the marketing cost for the company. HLF has extended its footprint outside its US market by pushing into Mexico. It may continue to add new countries to its geographical service area.
Earnings have been exceptional quarter to quarter and the sales figures have grown rapidly as well. The stock took a hit as earnings dropped to a mere 25% QoQ level this summer. However, the stock has rebounded and at the same time, EPS have bounced back to 50% growth in the September quarter. The stock reflected this increase by trading back up to a new high in November.
I bought my initial position on a day when the stock broke out of a base pattern on strong volume.
The day turned into a disappointment as the stock traded back down and actually closed lower on the day (see chart). Fortunately it was a small position (1.5% of the account) and I was able to have patience. Soon enough the stock rebounded and forged a new high. I added to my position twice since my initial purchase bringing it to a 4% position in December 2006.
The stock seems to be having a tough time maintaining trade above 40 but there is no significant fundamental change. One technical concern I have is that the RS line failed to break to a new high while the stock traded up and set a new record. This may indicate underlying weakness and I will be on the lookout for additional red flags.
Earnings have been exceptional quarter to quarter and the sales figures have grown rapidly as well. The stock took a hit as earnings dropped to a mere 25% QoQ level this summer. However, the stock has rebounded and at the same time, EPS have bounced back to 50% growth in the September quarter. The stock reflected this increase by trading back up to a new high in November.
I bought my initial position on a day when the stock broke out of a base pattern on strong volume.
The day turned into a disappointment as the stock traded back down and actually closed lower on the day (see chart). Fortunately it was a small position (1.5% of the account) and I was able to have patience. Soon enough the stock rebounded and forged a new high. I added to my position twice since my initial purchase bringing it to a 4% position in December 2006.The stock seems to be having a tough time maintaining trade above 40 but there is no significant fundamental change. One technical concern I have is that the RS line failed to break to a new high while the stock traded up and set a new record. This may indicate underlying weakness and I will be on the lookout for additional red flags.
Jan 5, 2007
The company came out with a press release overnight stating that sales were a bit lighter than expected, and 
estimating that next year revenue and eps would be in the lower end of the previous range given. The news was not extremely bad on the first look but investors paniced as the whisper numbers probably expected the company to beat and guide higher for next year. The stock sold off 20% right away and finished the day down almost 25%. This was obviously enough of a decline to stop me out of my position and leave me with a significant loss. I will continue to monitor the stock but technically it needs a lot of work to become attractive again.
estimating that next year revenue and eps would be in the lower end of the previous range given. The news was not extremely bad on the first look but investors paniced as the whisper numbers probably expected the company to beat and guide higher for next year. The stock sold off 20% right away and finished the day down almost 25%. This was obviously enough of a decline to stop me out of my position and leave me with a significant loss. I will continue to monitor the stock but technically it needs a lot of work to become attractive again.
No comments:
Post a Comment