For his "Executive Decision" segment of Mad Money Thursday night, Jim Cramer sat down with Jim Snee, chairman and CEO of Hormel Foods Corp. (HRL) , makers of Spam, Skippy peanut butter and Jennie-O turkey products.
Snee said that innovation continues to be the lifeblood of the company, which is why new products like pumpkin-spice Spam sold out in less than seven hours. The food business is constantly evolving, he said, and food companies need to evolve with it or be left behind. That's why Hormel is expanding some of its brands from retail and into the food service sector, where they can reach younger consumers at schools and universities.
Looking in the short term, Snee explained that a spike in avocado prices will compress margins for their Wholly Guacamole brand and a recent outbreak of swine flu will disrupt pork supplies, but over the longer term, he said, the company's businesses and brands remain strong. When asked about international expansion, Snee noted that business in China continues to grow and they're still learning from early investments and experiments made in Brazil.
We looked at HRL at the beginning of the week and concluded that "Aggressive traders could go long HRL on strength if they risk a close below $42." The strength did not happen and prices closed below $42 last night. HRL is indicated to open steady this morning.
In this updated daily bar chart of HRL, below, we can see that prices quickly declined below the rising 50-day moving average line and just "nicked" the 200-day line. This decline could be just a test of the 200-day line and a potential buying opportunity. Let's check further. Reading the chart from right to left we can see that the $42-$40 area on the chart from June to August should act as support so instead of buying strength we might switch to buying a successful test of support.
On the negative side, the On-Balance-Volume (OBV) line has weakened slightly with the price action and the Moving Average Convergence Divergence (MACD) oscillator is just above the zero line and pointed down.
In this weekly bar chart of HRL, below, we can see that prices are testing the flat 40-week moving average line, while the OBV line and the MACD oscillator are still pointed upwards.
In this Point and Figure chart of HRL, below, we can see two things - one is the support is well defined, and second, the chart is only projecting a small downside price target at this juncture.
Bottom line strategy: Early this week we were comfortable with the buying strength with HRL. We liked the stock but wanted to see the up-move start. With the pullback this week we'll shift gears and suggest buying a higher close today and then risk a new low close for the move down.
