Buy Alert: Hanesbrands (HBI)

By Jim Pearce • June 4, 2018

EQUITY TRADE INSTRUCTIONS

Symbol: HBI (NYSE)
Limit: Buy below $19.25
Holding Period: 5 months
Target Price: $23.25
Target Gain: 20.8%

OPTION TRADE INSTRUCTIONS

Symbol: HBI181019C00018000
Limit: Buy below $1.75
Strike Price: $18
Expiration Date: October 19, 2018
Target Gain: 200%

COMPANY DESCRIPTION

Hanesbrands Inc., a consumer goods company, designs, manufactures, sources, and sells a range of basic apparel for men, women, and children in the United States. The company operates through three segments: Innerwear, Activewear, and International. The company licenses its Champion name for footwear and sports accessories. The company markets its products through retailers, wholesalers, and third-party embellishers, as well as directly to consumers through the Internet. As of December 30, 2017, it operated 245 outlet stores in the United States and the Commonwealth of Puerto Rico, as well as 475 retail and outlet stores internationally. Link to company website.

TRADE RATIONALE

Longtime subscribers to Systematic Wealth will recognize Hanesbrands as a name we made money on a year ago, sewing up an 11% profit in the stock in only three months. This time, I am adding an options trade to the mix for those that would like to amplify the result.

HBI earns the highest possible score of 10 from my IDEAL Stock Rating System. However, its FPER (forward P/E ratio) of less than ten times this year’s earnings is masked by its trailing PER of 113, so it does not yet show up on many trading algorithms as being oversold.

In addition, HBI has been gaining technical strength over the past month, crossing over its 50DMA (50-day moving average) two weeks ago and close to breaking above near-term resistance near $19.

This is not an earnings play, in that HBI revised its Q2 and full-year EPS guidance when it released Q1 results last month. I do not expect HBI to significantly exceed its guidance when it releases its Q2 results in two months, but I believe confirming that number will earn the company a higher forward earnings multiple in the 12 – 13 range, in which case its share price should get back to $23 later this year.

Stock Talk

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Rick

06/04/18 ‐ 2:56pm ET June 4, 2018 at 2:56pm ET

In at $1.62 on Oct $18 Calls.

Dave NYC

06/04/18 ‐ 3:49pm ET June 4, 2018 at 3:49pm ET

Rick, I was asked to set the limit to be $1.60 or $1.65. “Acceptable prices are in multiples of 5 cents below 3 dollars”. How did you manage to fill at $1.62?

mrbb

06/04/18 ‐ 4:06pm ET June 4, 2018 at 4:06pm ET

I don’t know what platform you’re using, but on TOS just use the backspace and fill in the price.

Dave NYC

06/04/18 ‐ 4:33pm ET June 4, 2018 at 4:33pm ET

I am using Schwab. Guess it must be a platform issue.This also happened to many other trades as ell.

Janis Bell

06/04/18 ‐ 4:32pm ET June 4, 2018 at 4:32pm ET

I got the same request on Schwab’s platform as you Dave NYC

Rick

06/05/18 ‐ 4:41pm ET June 5, 2018 at 4:41pm ET

Dave NYC, Sorry I did not see this earlier. I entered the order through Fidelity’s Active Trader Pro and I had to pick either $1.65 or $1.60. I used $1.65 as the limit, but the trade was made at $1.62.

Stanley

06/04/18 ‐ 3:10pm ET June 4, 2018 at 3:10pm ET

HBI filled for 1.65

Stanley

06/04/18 ‐ 3:59pm ET June 4, 2018 at 3:59pm ET

turned out to be 1.61

Victor

06/04/18 ‐ 3:40pm ET June 4, 2018 at 3:40pm ET

HBI filled @ 1.65

DJ

06/04/18 ‐ 3:45pm ET June 4, 2018 at 3:45pm ET

Filled at 1.65

mrbb

06/04/18 ‐ 4:03pm ET June 4, 2018 at 4:03pm ET

I’ve been long HBI for over a year in my 401k since I think it is undervalued. Added a few of the recommended call options in my trading account based on the reco. Filled at $1.63 on TOS. Thanks!

John N

06/04/18 ‐ 4:04pm ET June 4, 2018 at 4:04pm ET

Filled HBI at $1.65.

Janis Bell

06/04/18 ‐ 4:33pm ET June 4, 2018 at 4:33pm ET

Definitely feeling like the dumb kid at the back of the room. Can someone explain why we buy the option at a strike price of $18 when the stock is already above $18?

Janis Bell

06/04/18 ‐ 4:34pm ET June 4, 2018 at 4:34pm ET

ALSO, is it ‘Buy to Open’ or another instruction?

Jim Pearce

06/04/18 ‐ 4:35pm ET June 4, 2018 at 4:35pm ET

Yes, buy to open.

Jim Pearce

06/04/18 ‐ 4:54pm ET June 4, 2018 at 4:54pm ET

Two reasons:
(1) buying an option in the money is less risky than buying one out of the money, and in this case I felt the extra risk of going out of the money was not worth the slightly lower premium cost of doing so.
(2) you also have to consider trading volume so you can get a decent fill. Generally speaking, the further out of the money an option is, the less open interest there is so you may not be able to get filled at all or only get filled at the asker’s price which usually reflects more time premium than you should want to pay.

Jeffrey J

06/05/18 ‐ 9:34am ET June 5, 2018 at 9:34am ET

Bought the 10/19/18 18 call @ $1.70 debit via TradeStation.

George McMillion

06/05/18 ‐ 9:34am ET June 5, 2018 at 9:34am ET

HBI filled at $1.65 on TDA

Daniel Long

06/05/18 ‐ 9:36am ET June 5, 2018 at 9:36am ET

HBI Oct19 C18 filled at $1.70 @ Fidelity.
DL

Benny K

06/05/18 ‐ 9:43am ET June 5, 2018 at 9:43am ET

Filled the Oct. 19 $18 call @ 1.70 on Schwab.

Jeff L.

06/05/18 ‐ 11:15am ET June 5, 2018 at 11:15am ET

Bought @ 18.72 per share I’m ot sure what option that is? is that a “call”?

Jeff L.

06/05/18 ‐ 11:20am ET June 5, 2018 at 11:20am ET

ok all set I bought 5 calls for 1.75 oct 19

Rick

06/07/18 ‐ 12:41pm ET June 7, 2018 at 12:41pm ET

I sold my Oct $18 calls this morning at $2.55.

Since I entered at $1.62, it was a 57% gain (pre-fees) in 3 days. Couldn’t pass up the quick profit.

I will keep monitoring HBI and may come back in later.

Rick

06/07/18 ‐ 12:42pm ET June 7, 2018 at 12:42pm ET

Forgot to say Thanks, Jim.

Jim Pearce

06/07/18 ‐ 12:54pm ET June 7, 2018 at 12:54pm ET

You’re welcome, looks like the timing on this one was pretty good. Thanks.

Jeff L.

06/08/18 ‐ 12:19pm ET June 8, 2018 at 12:19pm ET

any news on HBI I’m still holding is there a target price?

Jim Pearce

06/08/18 ‐ 12:41pm ET June 8, 2018 at 12:41pm ET

Hi Jeff. No news lately out of HBI, but the retail sector is on a roll so it may just be getting swept up in that euphoria. The target prices I use to manage the SW portfolio are contained in the alert above, but of course you may use whatever process works best for you including placing stop orders to protect some of your gain or simply closing out the position early as some of the folks commenting below have done.

Jeff L.

06/11/18 ‐ 11:43am ET June 11, 2018 at 11:43am ET

Thanks Jim I did see the target of 23 after i posted I’m going to close my position today to lock in a healthy profit. Thanks for the reply much appreciated.

Regards

Pat C.

06/20/18 ‐ 4:04pm ET June 20, 2018 at 4:04pm ET

Still holding Oct 18 calls at $3.70. My first !00%+ gainer. Up 15% on the stock as well. Sold some HBI at $22.35 in early January and held the other half all the way down. Great move from the bottom. Bought more on Jim’s recommendation.

Thanks for picking this one on the way up Jim.

Dan

06/08/18 ‐ 1:00pm ET June 8, 2018 at 1:00pm ET

Finally in but it was a cautionary tale in taking too long and I missed out on the last few days. Should have bid higher on Wednesday when I had the chance (my day order never triggered).
Anyway, I went with the Jan 19 20 options taking into account the recent rise to 20 today. A bit risky since it’s now over the stock buy limit at 19.25.
Thanks for the trade Jim. Looks like a winner already. Hope I can still catch up.

Stanley

06/08/18 ‐ 2:48pm ET June 8, 2018 at 2:48pm ET

HBI sold @ 2.63 for a 60% profit in 3 days.
THANK YOU!!

Mark F

06/21/18 ‐ 2:57pm ET June 21, 2018 at 2:57pm ET

Sold HBI 10/19 18 call @ $4.32 for 162% profit. Great work.

Ajax

06/22/18 ‐ 9:53am ET June 22, 2018 at 9:53am ET

Clearly HBI has been doing fantastic. What do folks recommend as a strategy for protecting a long position in a call like this. I have set up a trailing stop that will sell at market if the bid price drops 65 cents from when I set it up. And so far that trigger price has drifted upwards 10 cents just as I had hoped. I wondered what other strategies people use.

Pat C.

06/22/18 ‐ 11:32am ET June 22, 2018 at 11:32am ET

Approaching target; sell a half or a third and watch the rest.

Jim Pearce

08/01/18 ‐ 10:00am ET August 1, 2018 at 10:00am ET

HBI is getting slammed this morning despite reporting Q2 results that came in right at the midpoint of guidance (https://finance.yahoo.com/news/hanesbrands-reports-second-quarter-2018-100000343.html). Looks like the “whisper number” was considerably higher than that. The company also reaffirmed its guidance for the remainder of the year, so my original thesis is still in play. Those of you that have already sold the call option for a profit may want to consider repeating that trade, my guess is the stock will recover about half of this morning’s loss by the end of the week once all of the program trading has cleared.

JoeJB

08/01/18 ‐ 10:34am ET August 1, 2018 at 10:34am ET

Thanks Jim. Got back in at $1.26 so we will see how this works.

Dan

08/01/18 ‐ 12:27pm ET August 1, 2018 at 12:27pm ET

Thanks Jim. I’m glad I checked forum. I might have missed this one and I suspect it has potential to beat the original trade.
In for $.88 on $20 strike for Jan. Worth 3x if it hits your $23 strike point.

Pierce I.

08/01/18 ‐ 1:27pm ET August 1, 2018 at 1:27pm ET

Thanks Jim. Good trade last time on this. In @ .98 on $18 strike on TDA

Daniel Long

08/01/18 ‐ 2:28pm ET August 1, 2018 at 2:28pm ET

HBI BTO Oct 19 C 18 @ 1.03 at Fidelity.
Thanks for suggestion, Jim.
DL

Daniel Long

08/01/18 ‐ 2:35pm ET August 1, 2018 at 2:35pm ET

Jim,
Are you going to resume following this option trade, along with the equity trade?
Thanks.
DL

Jim Pearce

08/02/18 ‐ 11:56am ET August 2, 2018 at 11:56am ET

Not unless I issue an alert announcing it as an official trade. My comment earlier this week was meant as more of an observation and not intended to be construed as a formal recommendation. However, if I decide to put that trade back on I will issue an Alert and then start tracking in the portfolio table again. Thanks.

Stanley

08/01/18 ‐ 3:27pm ET August 1, 2018 at 3:27pm ET

HBI OCT 19C @ $18. filled for .97
@ Fidelity

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