• GB Davis

Security in Focus: Hormel Foods ($HRL)

Updated: Apr 3, 2019

On the negative side of the ledger here, we do not like this security at an 18x+ multiple. Further, over the past year, we are concerned with this security's substantial outperformance versus the S&P500. However, what we do like is this: low debt, consumer staple. From a purely trading perspective, a buy of the common ($43.08)(1/4 position to open) with a stop loss of $42.50 with one $40 May 17 put contract (active monthly intrinsic hedge) per 100 lot ($0.25), net basis $43.33 before costs. If stopped out, we will look for re-entry points. Ex-Div on 4/12/19 Earnings on 5/23/19. Reduce position by 1/2 at $45.00. Not Beta obvious, so also looking at alternate hedges given S&P500 outperformance over past 12mo. UPDATE 4/3/19: stopped out at $42.50, put picked up 0.15 gain. Gross basis of $43.33 v. stop of $42.65 (-1.00%), will look for lower re-entry.

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