There are 2 dramatic declines in the last few months worth noting. First on Nov 22nd, hedge fund manager Whitney Tilson disclosed his short bet on LL at a charity idea conference (sending the shares down 11%). And then the second on Dec 10th the shares were down 13% as LL was hit with a class action suit with some claims about ill-gotten profits from selling illegal wood, which was one of the pillars of Tilson’s short bet.
All that being said, the top holders list (which was recently updated for holdings through December 31st) reads like a who’s who of massive mutual funds and smart hedge funds:
with no strong view on the company’s fundamentals, but cognizant of the positive tone and results of housing related stocks today, I would suggest it would be hard to step in front of this one as the 26% short interest could fuel a massive short squeeze on a beat and raise. That said the 21% one day decline in July on their earnings warning is a reminder of the fact that sometimes the shorts get it right.
LL – saw a good size bearish roll when the stock was 56.51, a trader sold to close 15,000 Feb 60 puts at 7.50 to close and bought 15,000 March 60 puts for 10.30 to open. The company has not set its reporting date, but Bloomberg estimates Feb 19th. LL is down 14. 5% so far in 2015, but still up 13% or so from the 52 week lows made in Sept 2014 just below $ 50. The stock had a massive day, closing up 7.5%, I suppose the 22% short interest doesn’t hurt on rally days like yesterday.
The main takeaway from the put activity is that one of those hedge fund longs were either very worried about their holding in the coming weeks/months, or a speculator was fairly convicted that the stock would be testing the 52 week lows in the near future.
Does this suggest anyone know something they shouldn’t have? I have no idea. I do not know the insider trading laws as they relate to activist investors, but if the short seller who was interviewed for the 60 minutes piece spread the news prior, then I would guess this is something that regulators would not take kindly to. But the big question is whether or not the short seller could himself add to his position knowing that he is participating in the very story that could be the beginning of the end for the company? I suspect he can, we have seen it with Bill Ackman in Herbalife (HLF) and again with his involvement in Allergan/Valeant.