(B)(N) HAIN Hain Celestial Group Incorporated

Drama. The Hain Celestial Group is a familiar in every kitchen and still a favorite on The Street (The Street, June 10, 2013, ‘Mad Money’ Lightning Round: The Bears Are Wrong on Hain). It still doesn’t pay a dividend but it’s been in the Perpetual Bond™ since $15 in 2009 and it’s trading at $65 today and still well-above the current Risk Price (SF) of $52. Please see Exhibit 1 below.

Courtesy: Ella’s Kitchen

Sales are about $1.4 billion per year and the net income after tax tends to come in at about 6% or $80 million last year, and it recently snapped up the baby-food maker Ella’s Kitchen Group in the U.K. for an undisclosed sum to further develop its international market.

Our estimate of the downside in the stock price due to ambient volatility is as much as minus ($6) per share so that we ought to be prepared for any price between the current $65 and $60 to $70. We can afford the stop/loss at $60 but we could be sold out by over-anxious and opportunistic bears who really don’t know down from up and “worry” about earnings per share (EPS) to which they don’t have access anyway.

We’ve sacrificed some of our profits and bought the July put at $65 for $1.65 per share and also sold the July call at $70 for $1.00, so that for a net cost of holding the stock at $65 and $0.65 ($1.65 less $1.00) per share for the collar, we don’t really care who is shorting the stock next, absent a material change in the price of risk.

However, there are 47 million shares outstanding but the float is only 39 million shares and there are a number of institutional holders with holdings of between 5% and 20% of that and just six who in aggregate hold more than 50% of the float or cannot afford to eat healthy and prefer the markets on Wall Street.

Exhibit 1: (B)(N) HAIN Hain Celestial Group Incorporated – Risk Price Chart

(B)(N) HAIN Hain Celestial Group Incorporated

Hain Celestial Group Incorporated and its subsidiaries manufacture, market, distribute and sell natural and organic products.

(Please Click on the Chart to make it larger if required.)

From the Company: The Hain Celestial Group is a leading natural and organic products company in North America and Europe. Hain Celestial participates in many natural categories with well-known brands that include Celestial Seasonings®, Earth’s Best®, Ella’s Kitchen®, Terra®, Garden of Eatin’®, Sensible Portions®, Health Valley®, Arrowhead Mills®, MaraNatha®, SunSpire®, DeBoles®, Gluten Free Cafe™, Hain Pure Foods®, Hollywood®, Spectrum Naturals®, Spectrum Essentials®, Walnut Acres Organic®, Imagine®, Almond Dream®, Rice Dream®, Soy Dream®, WestSoy®, The Greek Gods®, BluePrint®, Ethnic Gourmet®, Yves Veggie Cuisine®, Europe’s Best®, Cully & Sully®, New Covent Garden Soup Co.®, Johnson’s Juice Co.®, Farmhouse Fare®, Hartley’s®, Sun-Pat®, Gale’s®, Robertson’s®, Frank Cooper’s®, Linda McCartney®, Lima®, Danival®, GG UniqueFiber®, Natumi®, JASON®, Zia® Natural Skincare, Avalon Organics®, Alba Botanica®, Queen Helene® and Earth’s Best TenderCare®.  Hain Celestial has been providing “A Healthier Way of Life™” since 1993. The Hain Celestial Group has 4,000 employees and is headquartered in Lake Success.

The Price of Risk

The calculated Risk Price (SF) is a provably effective estimate of the “price of risk” which is “the least stock price at which the company is likeable” (Goetze 2009) and “likeability” is determined by the demonstrated factors of “risk aversion” – we want to keep our money and obtain a hopeful return above the rate of inflation – and the properties of portfolios of such stocks. Stock prices that are less than the price of risk can be said to be “bargain prices” but with the risk attached that the company might never get a higher price other than that due to ambient volatility or “surprise”; on the other hand, investors who are willing to pay the “full price” above the price of risk, and buy and hold the stock at those prices, must also be confident, and have reason to believe, that the company will produce those values, absent new information.

Please see our Posts, The Price of Risk, August 2012 and The Nash Equilibrium & Its Stock Price, October 2012, for more information on the theory.

To see what else “risk averse” investing can do for us, please see our recent Posts, The Wall Street Put, April 2013, and earlier Posts such as The Dow Transports, March 2013, or The Risk Adjusted Dow, March 2013, or The Canada Pension Bond, February 2013, and for a more colorful description of investment risk and the application of the “price of risk” to mergers & acquisitions, please see our Post, Bystanders & Collateral Damage, April 2013.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™“
Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.Disclaimer Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

NY.