Some off topic posts are okay, but please prefix them 'OT:' in the subject.
- Manlobbi
Halls of Shrewd'm / US Policy
No. of Recommendations: 12
Hershey Company shares closed at $184.11 Friday, in pre-market at $184.00.
A well respected company that falls into that category of "never seems to get cheap".
The business is doing well lately, as usual.
The stock price has tanked recently, down by more than half since May, and it is now as cheap as its cheapest in ages, a hair under 20 times trailing earnings.
I think the last time it was cheaper on that metric was in 1999 due to a one-time gain of some sort, haven't looked into it.
As an aside, I think the general dumping of junk food companies because of fears of falling sales from appetite control drugs is hilarious.
If this is a firm that you have always wanted to own (a feeling I have had), this certainly seems like a better time than most.
And the straight line 50% drop since May certainly qualifies as falling knife behaviour. It might fall more, but my hunch is that the 2-3 year returns from here will be pleasant.
Jim
No. of Recommendations: 1
Done. I've been wanting them for a long time.
Thanks for the heads up.
No. of Recommendations: 1
Jim, looking at Nestle too? Swiss listing. Looking in value territory sub 100. Nestle tastes better than Hershey IMO (scuttlebutt)
No. of Recommendations: 7
looking at Nestle too? Swiss listing. Looking in value territory sub 100. Nestle tastes better than Hershey IMO (scuttlebutt)
That's a low bar!
OK, so you don't have to eat the stuff, is it at least a good investment?
At about 100 CHF, it's down a bit from it's high of 130 but still significantly higher than the 70-80 range it stayed in from 2014 to 2019, so at about 100 CHF, it's now trading at 28 times ttm earnings, or 22 times forward earnings. Is there some reason to explain the high price, other than just that it's been an expensive stock for a long time?
I'm having trouble seeing it. The have almost exactly the same revenue and net income now as they had 10 years ago, and I can't see any reason that that would grow. In fact, with $54b in debt and $1.6b in interest expense, payments on the debt will increasingly cut into their $10b or so in net income, as they turn over their debt at much higher rates.
They pay out a dividend of 3%, and they have bought back about 1.5% of shares on average every year for the past 10 years, so let's call it a 4.5% dividend. I can get the same rate on a 10 treasury bond, without worrying about capital loss on a stock that is still trading at pretty high multiples.
DTB
No. of Recommendations: 1
I totally agree. I've been looking at these "old favourites" (Nestle was also touted as a buy and hold forever at the right price) at around 20x earnings and it's held by some of the super investors, however, I can't get excited about the future returns when there's tech companies with little debt and moats trading at single digit earnings and PCFC. I think Tecmo highlighted the the Kraft / Heinz example too. After reviewing them all If I was to dip a toe in this space it would be Diageo where the eps growth potential is greater IMO.
I'm sticking to Berkshire and Moaty tech in the US and China. Perhaps I need to diversify more? or like the FANG stocks anything else is deworsifying! These tech cos have terrific growth and runway potential.
No. of Recommendations: 0
But even for DEO / DGE looking at a fag packet - $7.15 average 3 year EPS, 8% growth x 10 years grows to $15.44 x 20 PE = $308. If you want a 12% return you need to pay $99 vs a current 142.
No. of Recommendations: 8
I can't get excited about the future returns when there's tech companies with little debt and moats trading at single digit earnings
Could you name a few, which are not ex-growth and not Chinese? Any that I look at, with even single digit growth rates are trading at forward PEs over 20.
No. of Recommendations: 2
The current ones on my list are Chinese (shock horror 😯)
US.... purchased Meta in 2022 @ 15PE (still have it) and Alphabet in Jan 23 17PE (still have it) Meta made 9PE at the bottom I believe! @ sub $100.
Other than that you're right slim pickings in the US atm. Meta and Alphabet are priced at fair value now.
No. of Recommendations: 4
I've taken a closer look at HSY and would say the earnings quality and growth potential looks better than some of the others named above. Target entry price is 150 for me. Nice company and will add it to my watchlist. Thanks Jim
No. of Recommendations: 3
Any reason for the 150 target, specifically? I'm curious because I started a small position today.
I considered factors like 1) lead & cadmium levels 2) child labor in the cacao supply chain 3) structural brand and purchasing changes in consumers 4) general overvaluation in the market and 5) climate change impact. 5 is my biggest concern (cocoa future pricing data supports this), but it isn't company specific and HSY may have advantages relative to competitors from their scale and resources.
I don't know how to predict impact from GLP-1 agonists. I don't try to follow pharma/biotech closely but it looks like an earlier but still widely used semaglutide injectable (Saxenda) is coming off patent protection next summer and generic makers are going to go after that market. Drug costs are a problem, and biologics are intrinsically more expensive to manufacture. My impression was that side effects were not negligible. Anecdotally, I have seen people continue to struggle with overeating while taking them.
I convinced myself to start the position by finding one of the many long term p/e charts for HSY (
https://www.fool.com/investing/2023/11/03/i-paid-m...) and it really is near the bottom of a well established range. The 2.5% yield looks reasonable, and the short ratio data doesn't raise red flags.
No. of Recommendations: 3
No. of Recommendations: 6
Not sure if this has been mentioned but there are supply and cost issues with both chocolate and sugar. 2/3 of all cocoa comes from Ivory Coast and Ghana and due to heavy rains/floods which is causing very low yields.
I don't eat a lot of chocolate but when I was looking at candy like M&Ms the prices were quite high. People will pay for snacks, up to a point.
https://thetakeout.com/chocolate-supply-low-cocoa-...
In April, both Hershey and Mondelez, two global companies that produce sweets like Reese’s, Kit Kat, and Toblerone, acknowledged that the rising price of sugar is a challenge that has led to higher costs for consumers. Mondelez already announced in November that it would be raising prices on some products due to the both chocolate and sugar shortages, and Nestlé, another major sweets producer, said it would also be raising prices, as reported by Bloomberg.
