Swine Flu Killing HOGS

I am far from being an expert on swine flu, but based on everything I have heard, there is no evidence to support that swine flu can be transmitted through the consumption of pork products. Still, investors did not let this fact stand in the way of selling Zhongpin (HOGS), the $231 million (market cap) Chinese producer of pork and pork products. HOGS fell 6.2% yesterday on the second highest volume session since last July in what was clearly a case of guilt by association.

Options traders, however, reacted in a different fashion. The graphic below, courtesy of WhatsTrading.com, shows that while options activity spiked dramatically, most of the action was in calls, which was running at about twice the rate of put volume yesterday. Also, implied volatility (not shown) more than doubled.

Obviously there is a great deal of uncertainty surrounding swine flu – and a fair amount of misinformation being circulated. There is no doubt that eating pork products is unrelated to the spread of swine flu, but that does not necessarily mean that pork products and stocks such as Zhongpin will be shunned and suffer real declines.

[source: WhatsTrading.com]

Disclosure: Author is long HOGS at time of writing.

Comments

[Tricky:]

"Obviously there is a great deal of uncertainty surrounding swine flu – and a fair amount of misinformation being circulated. There is no doubt that eating pork products is unrelated to the spread of swine flu, but that does not necessarily mean that pork products and stocks such as Zhongpin will be shunned and suffer real declines"

The problem is that people are not rational, they panic like sheep. I would think the fact it is called "swine flu" will have a real effect on pork products. How big? Dunno. But I'd be surprised if it is negligible.

Apr 28 11:59 AM

[BigJake:]

Any chance that governments round up all hogs and kill them to prevent spread of the virus among hogs in the name of public health? Might want to revisit that long HOGS position.

Apr 28 02:13 PM

[yellowhoard:]

You're stupid Somalia.

Know why?

It's because Freya is rubber and you're glue. And, whatever you say bounces off of Freya and sticks to you.

Apr 28 04:59 PM

[doubleguns:]

I am curious who the lucky fool is.


On Apr 28 04:39 PM SOMALIA BAY CAPITAL PARTNERS ( DJIA CRASH 2nd WEEK OCTOBER 2009 ) wrote:

> in general you are very stupid, but on this you will be lucky, not
> because pork bellies will rally or anything, this is fools luck.
>
> market will rise and you will think you are genious because HOGS
> went up, when at the same time buying any DJIA or NASDAQ stock will
> pay more.

Apr 28 04:59 PM

[MarvinMBA:]

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Apr 28 08:12 PM

[cameroni:]

Where are the comments by Somalia?

Apr 29 02:32 AM

[Moon Kil Woong:]

I bet the flu will be tied to unsanitary conditions in some Mexican pig farms and butcheries. Unhealthy animals and unhealthy breeding breeds germs and disease. At least they aren't feeding animals to animals like how mad cow disease began.

Apr 29 05:24 AM

[Windwood Tr...:]

I don't see that "MAD COW DISEASE" did any permanent damage to the beef industry-
So it will be with pork-
HOGS is a pretty good looking long bet, I'm thinking.

Apr 29 10:58 AM

[Gedankonomist:]

Any chance the swine flu will kill off some of the PORK going thru Congress?

On Apr 28 02:13 PM BigJake wrote:

> Any chance that governments round up all hogs and kill them to prevent
> spread of the virus among hogs in the name of public health?

Apr 29 02:49 PM

[yellowhoard:]

SA must have pulled his juvenile name call of Freya.


On Apr 29 02:32 AM cameroni wrote:

> Where are the comments by Somalia?

Apr 29 05:21 PM

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May 05 08:17 PM

[silver-bullet:]

I think the swine flu will lend positive action to HOGS, since it's products are manufactured in factories with relatively higher sanitary standards than the pork the common folk buys in the wet market.

Increasingly affluent Chinese will flock to the super marts where pre-packaged frozen pork is sold. Zhongpin has a dominant network penetration and stands to profit from this.

May 08 01:18 AM

[Freya:]

Keep up the Good work. This is imaginative thinking into an investment opportunity which I had overlooked.

It would be nice to have HOGS drop a tad more to create a major buying opportunity. I would imagine that Hogs from Infected countries would be shunned but Unless the Chinese people keel over in droves which I consider unlikely given their propensity to actually gaurd their borders, HOGS will not only be viewed by China as being safe but also the rest of the countries in Asia.

Apr 28 04:35 PM