Sell Alert: GNC Holdings (GNC)

By Jim Pearce • December 26, 2016

TRADE INSTRUCTIONS
Date: December 26, 2016
Name: GNC Holdings
Symbol: GNC
Type: Close
Limit: Sell at market

TRADE RATIONALE
Normally I’m not a fan of “tax loss harvesting” since it means realizing a loss, but with GNC closing below its stop loss level on Friday it’s time to throw in the towel on this one so we can use this loss for 2016 to offset the string of big gains we have realized recently.

That said, something about the way this company has traded over the past six months strikes me as odd. Either the stock has become grossly oversold, or there is another shoe to drop regarding its financial situation.

By rule I have to sell a stock once it closes below its stop loss level, but depending on how this plays out I may go back into it in 2017 if it becomes apparent the company has stabilized its income statement.

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Brent

12/27/16 ‐ 9:16am ET December 27, 2016 at 9:16am ET

GNC was recently hit with a 2.25M misbranding claim.

Jim Pearce

12/27/16 ‐ 9:37am ET December 27, 2016 at 9:37am ET

Yes, but that settlement with the DOJ was months in the making and publicly known well before its recent price drop, so I don’t think it would explain last week’s price action. http://finance.yahoo.com/news/gnc-agrees-changes-avoid-sale-192324794.html

Sbless

12/27/16 ‐ 10:03am ET December 27, 2016 at 10:03am ET

Jim,
There is an error in the spreadsheet regarding BKE. You have a sale price greater than the buy price yet you show a negative return.

Jim Pearce

12/27/16 ‐ 12:33pm ET December 27, 2016 at 12:33pm ET

Thank you for pointing that out, it has been corrected.

Larry Johnson

12/27/16 ‐ 11:42am ET December 27, 2016 at 11:42am ET

Jim,
I’m in agreement with you on the “something else out there” that we don’t know about. It could be either good or bad. And I agree, the way it’s been trading is pretty “strange” given that the settlement has been known for a while now.
As you originally stated; this one is gonna be a rocky ride. With that said and it being up a little today, I just put a fairly tight trailing stop on it for now. IF it should turn back down, it’s automatically gone. IF it continues up, I’ll continue riding it for a while.
On the options side, there is a petty good hunk of short term (Jan) open interest on calls, but nothing that indicates anything “unusual”. It’s a strange stock.

Jim Pearce

12/27/16 ‐ 11:49am ET December 27, 2016 at 11:49am ET

If it turns out to be something bad, my fear is that it could be some sort of accounting issue that could drive its share price down further. The good scenario could be that short sellers are pounding away it now, but will be forced into a short squeeze if/when a buyout offer materializes. Could go either way.

Larry Johnson

12/28/16 ‐ 10:08am ET December 28, 2016 at 10:08am ET

Sold on the drop this morning.

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