As higher cotton prices have caused Hanesbrands shares to sell off, the underwear maker has become a "whipping boy" for those who think cotton prices will significantly affect profits, said analyst Doug Thomas on Thursday.
The Winston-Salem, N.C.-based company , however, recently gave guidance that suggests it will be able to pass higher costs onto consumers, the JET Investment Research analyst noted. It is also hedged for rising cotton prices through October 2011, he said.
A sell off in cotton would help HBI, though. Thomas pointed out that cotton is a cyclical commodity, which tends to rise and fall.
With the stock trading at 8.5 times earnings, Thomas thinks Wall Street isn't giving HBI the love it deserves. Guy Adami, managing partner at Drakon Capital, agreed.
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UNUSUAL ACTIVITY: YAHOO!
In the options market, Yahoo! saw an aggressive buyer get into the April 18 calls on Thursday, reports trader JJ Kinahan. The activity led to stock trading, as people seem to be buying shares in addition to trading options.
For his part, Kinahan is long YHOO . He called the Sunnyvale, Calif.-based company is the "redheaded stepchild" of the Internet. It's not the most loved Internet play, but Yahoo! has been around for a long time and a lot of people still use it, so he thinks there's a good chance someone may come in and do something with it.
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POPS & DROPS
Stocks fell slightly Thursday as investors weighed strong signs of an economy on the mend against worries over turmoil in Egypt. The "Fast Money" traders, though, thought to these market movers were most notable by midday trading.
Pops (stocks that went up)
Green Mountain Coffee (GMCR) popped 16%: The seller of Keurig single-cup brewers said it estimates second-quarter profit higher than the Street’s projection. Stuart Frankel's Steve Grasso likes the product and the stock, but would wait for a pullback to buy shares.
Drops (stocks that wend down)
CVS Caremark (CVS) dropped 6%: Shares sold off after the drugstore giant posted a drop in fourth-quarter profit. CVS said the decline stemmed partly from the termination of large client contracts along with a decrease of coverage under Medicare Part D. Should the stock drop to $31.50, Guy Adami of Drakon Capital would consider buying shares.
Merck (MRK) dropped 2.5%: The drug company reported a fourth-quarter loss of $531 million, or 17 cents a share, which is far below the average analyst's estimate of 88 cents a share. Veracruz founder Steve Cortes likes this stocks 4.5 percent dividend yield. He's a buyer on this pullback.
Anadarko Petroleum (APC) dropped 3%: The independent oil & gas company's stock sold off after being downgraded to ‘equal-weight’ from ‘over-weight’ at Barclays, reports options trader JJ Kinahan. He would be careful with APC.
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CALL THE CLOSE
As Thursday's program came to an end, Grasso guessed where he thinks the market could go.
"The market has shown us that the downside is limited," Grasso said. "For now, I would be a buyer of the market."
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Trader disclosure: On Feb. 3, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Guy Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE) and (BTU). Steve Cortes owns (EXC). Steve Cortes owns (MO). Steve Cortes owns (PM). Steve Cortes owns (SVU). Steve Cortes is short (LVS). Steve Cortes is long U.S. Treasuries. Steve Cortes is long German Bonds. Steve Cortes is short Gold. Steve Cortes is short Crude. Kinahan is short (SPY) through options. JJ Kinahan is short (NFLX) through options. JJ Kinahan is short (INTC) puts. JJ Kinahan owns (F) Calls. JJ Kinahan is short (YHOO) puts. Kinahan owns (C). Steve Grasso owns (ASTM), (BA), (BAC), (BWC), (C), (CSCO), (JPM), (LIT), (LPX), (MT), (MHY), (NDAQ), (PFE), (PRST) and (S).
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GUY ADAMI
Adami's wife works for (MRK)
STEVE GRASSO
Stuart Frankel & Co and its partners own (AAPL)
Stuart Frankel & Co and its partners own (ABT)
Stuart Frankel & Co and its partners own (ABX)
Stuart Frankel & Co and its partners own (CUBA)
Stuart Frankel & Co and its partners own (GERN)
Stuart Frankel & Co and its partners own (HSPO)
Stuart Frankel & Co and its partners own (NEM)
Stuart Frankel & Co and its partners own (NWS.A)
Stuart Frankel & Co and its partners own (NYX)
Stuart Frankel & Co and its partners own (PDE)
Stuart Frankel & Co and its partners own (PFE)
Stuart Frankel & Co and its partners own (PRST)
Stuart Frankel & Co and its partners own (RDC)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners own (UAL)
Stuart Frankel & Co and its partners own (XRX)
Stuart Frankel & Co and its partners own (SDS
Stuart Frankel & Co and its partners are short (QQQQ)
Stuart Frankel & Co and its partners are short (AAPL)
DOUG THOMAS
Thomas has no disclosures
FAST 360
Carter Worth, Scott Nations, and David Katz have no disclosures on (LVS)
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