A Longer-Dated Play

Add HAS Calls

By Bryan Bottarelli
Tuesday, October 31, 2006 2:39 PM EST
Tue, 31 Oct 2006 19:39:00 GMT

Dear Bottarelli Research Member,

We’ve been locking and loading some really quick trades lately, so I figured it was a good time to take a step back and take a breather. For the purposes of this alert, we’re going to take on a longer-term approach and play the great upside momentum we’re witnessing in toymaker Hasbro (HAS – NYSE) leading up to Christmas.

HAS

As you can see from the chart, the stock popped on October 23rd when both Q3 revenues and earnings per share exceeded analyst estimates by 7.8% and 16%, respectively. With a stranglehold on the best selling toy names in the world (notably Candy Land, Easy-Bake, Hungry Hungry Hippos, Dungeons & Dragons, Disney, Lite-Brite, Lord of the Rings, Milton Bradley, Monopoly, Mr. Potato Head, Playskool, Nerf, Play-Doh, Scrabble, Star Wars, Super Soaker, Spider-Man, Trivial Pursuit, and many others) it looks like HAS will ride some great momentum over the next month or so.

What strikes me about HAS is that they’re masters at packaging and marketing. Case in point, their Star Wars license posted $69 million in revenues even though the last installment of the movie saga was released almost two years ago.

Even more impressive is that Hasbro was able to post great Q3 numbers despite Wal-Mart slashing their toy prices by almost 25%. And if that weren’t enough, Hasbro management spent about $131 million last quarter repurchasing 6.6 million shares. All of this signals that HAS it not finished moving higher, and I’d like to take on a longer-term upside position to capitalize on the rally. For all you longer-dated traders, here’s your play.

PLAY: Buy the HAS January 25 Calls (HAS AE) at or under $1.80, good for the day. Current bid/ask spread is $1.60 to $1.75. Place a protective stop loss at $1.00.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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