I picked up 7300 shares today. I expect more upside risk than downside on this one. Once public hysteria becomes rational, and people realize this is a human to human virus that has ziltch to do with consumation of pork products and that Smithfield is about more than just pork (Butterball, etc.)...
...Shorts will race to cover
...Traders will race to get the quick trade to $10 ten day MA
Guy Adami of Fast Money is correct; the risk to reward here is too compelling...
this stock belongs between $6-8 and the only reason it was higher before was due to a short squeeze. Forget swine flu, the debt alone is enough to drop the price. Probably be some higher costs from all the extra testing and inspections too. I expect a drop in sales factors in. I don't see the stock surging back anytime soon.
I tend to agree. Call options on this stock at $10 strike price are way up today. Looks like this is a cheap option, although not in the money.
Relatively little hedging, the prices of the puts appear a little high, especially for May timeframe.
I would suspect that SFD would be eligible to get some help from the government if the business is further impacted by this outbreak.
us closing borders. pig meat will spoil because because of it. oops! it can be transported by boat. once it has been determined that the flu came from the family of a family member who worked at the hog farm sfd will be in serious trouble. and will have to issue a public relations statement defending why they failed to be forthcoming about the flu issue.
The current hot news involves this flu strain, nobody knows for sure where or how it started. While it is hot and front page news, all sorts of "theories" will be conjured up, mostly wrong!
Very soon the facts will surface and as always it will prove the world has overreacted, as usual.
The next "new hot news crisis" will come about, as always, and this problem will drift away and become a non-event.
SFD is trading at half of its book value. There is a significant short position and with the rumor mill pumping out as much negative theory on this company yesterday, the stock did not sell off dramatically!
The next significant change in price will be up for SFD.
not so fast on the risk to reward theory. the major risk is sfd hog operations in mexico has be viewed by many around the world as a business that no one wants in their community, not even the mexicans want to put up the hog stench and filth anymore. so i expect public opinion will force to sfd to shutter many of their hog operations in foreign countries and usa. fewer hog farms will impact sfd revenues and earnings. financially, sfd will suffer and perhaps be forced to file bankruptcy.