The Smart Way to Own HAE: Collect 8.8% Before You Even Buy
At about $80.53 a share, Haemonetics (HAE) is trading about 7.6% below its 52W high.
Do you think HAE stock is a good long-term bet at current levels? What about at a 40% discount at about $50 per share? If you think that is a steal, and have some cash ready to go, here is a trade.
8.8% annualized yield at 40% margin of safety, by selling Put Options.
- Sell a long-dated Put option expiring 1/15/2027, with a strike price of $50
- Collect roughly $250 in premium per contract (each contract represents 100 shares)
- That’s about 4.8% annualized yield on the $5,000 you’re setting aside for the possibility of buying the stock
- This cash parked in a savings or money market account will earn an extra 4.0%, taking total yield to 8.8%
- And you give yourself a chance to buy HAE stock at deep discounted price of $50
However, this is not the only stock strategy in town. Trefis High Quality Portfolio is a sophisticated framework designed to reduce stock-specific risk while giving upside exposure.
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Possible Trade Outcomes: You Win Either Way
| Stock Price Outcome | What It Means For You |
|---|---|
| HAE stays above $50 | You keep the full $250 premium – 5.0% extra income over the next 382 days on cash that might otherwise earn you 4.0% or less. You never buy the stock and simply walk away with the cash. |
| HAE closes below $50 | You’ll be obligated to buy 100 shares at $50. But thanks to $250 premium, your effective cost basis is just $47.5 per share – a roughly 41% from current level. |
But to hold this trade with conviction, you want to see long term upside in the stock. Because if it comes to it, you want to be excited about buying the stock cheap.
First, you want fundamentals to check out. For details, see Buy or Sell HAE Stock or check Haemonetics Investment Highlights
Second, you want to better understand competitive advantage and industry tailwinds. Below is what specifically gives us the conviction.
Why Hold HAE Stock Long-Term
Haemonetics exhibits a wide moat built on high switching costs and has demonstrated pricing power. The company is a market leader benefiting from a strong, secular tailwind from the growing demand for plasma-derived therapies. Despite the loss of a major customer, underlying industry growth makes it an attractive long-term holding.
Competitive Advantage
We classify HAE’s economic moat as WIDE, with the primary source being Switching Costs
- Haemonetics has consistently implemented price increases, citing ‘pricing benefits’ as a key driver of gross margin expansion.
- The NexSys PCS device and NexLynk DMS software form a deeply integrated ecosystem for plasma collection, creating significant operational hurdles for customers who might consider switching.
See Haemonetics Full Analysis.
Industry Tailwind
The industry tailwind is STRONG, with CAGR projection of 8.5% to 9.4% through 2030 (Grand View Research, Allied Market Research)
Secular Trend: Aging Population and Increasing Prevalence of Chronic Diseases
Key Risks: Customer concentration and potential for regulatory scrutiny or litigation.
Financial Guardrails
Cash Generation: Positive Free Cash Flow
Balance Sheet: The company has a net debt position, but its debt is well-covered by operating cash flow.
Not comfortable with options or stock-specific trades? PORTFOLIOS are even better.
The Best Investors Think In Portfolios
Individual picks can be volatile but staying invested is what matters. A diversified portfolio helps you stay the course, capture upside and reduce downside
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.