Hasbro: A high-risk play that's not for the squeamish

Originally, some thought the belt-tightening and increased savings by U.S. consumers would be short. It's been anything but: the frugality trend is sweeping across the economy, and it presents a growth hurdle for toy makers like Hasbro. Don't misunderstand, as the U.S. economic recovery progresses, major industrial and infrastructure plays will do well, revenue and earnings of Fortune 500 companies will increase, but will consumers return to the stores? Not in as nearly as great numbers as before the recession. Moreover, if the change continues and intensifies, it has the capacity to alter the structure of the U.S. economy, and substantially decrease the 60-65% of U.S. GDP attributed to consumer spending.

That said, technically, Hasbro's stock chart is in an uptrend and it's showing signs that institutional investors believe HAS will weather this change in consumer behavior. The First Call FY2009/FY2010 EPS estimates for HAS are $2.12 to $2.12.

Even so, HAS is not for the squeamish, and the Sell/Stop Loss has been raised to $24, or to just under the entry price, from $17.

Hence, HAS is now a 'set it and forget it' play – not unlike shorting the U.S. dollar versus any other, major currency on any given day: the calculation argues there is the potential for considerable upside with HAS, but there's also high risk, and the revised Sell/Stop Loss eliminates the risk associated with any change in the company's narrative. Those establishing a new position should use a tight stop, as well.

Stock Analysis: Hasbro Inc. is a high-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in HAS now. Under any circumstance, don't buy more than 50% of your HAS position before December 2009. Revised Sell/Stop Loss if you bought shares in this company: $24.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.