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Halls of Shrewd'm / US Policy❤
No. of Recommendations: 0
Mungo went positive $184/share
Another shot at the brass ring?
HSY low risk buy?
No. of Recommendations: 9
HSY low risk buy?
Well I think so, but presumably half the people trading today think it's overpriced here and half think it's underpriced. There are 7 billion other people on the planet.
I plan to put mine it in a coffee can, and I expect to find something nice in there in a few years.
That's definitely not my style, but life is a learning experience.
Jim
No. of Recommendations: 1
I bought a starter position at around 190 and am keeping an eye on some of the factors that are presumably affecting price
1. Cocoa prices...is this cyclical or more secular?
2. GLP-1 drugs...I brought this up before; to what extent will these reduce consumption of sweets vs fast foods vs all food..
3. Rise of off brand ...Mr Beast and future upstarts...Monster, Celsius etc in the beverage space...
No. of Recommendations: 11
I bought a starter position at around 190 and am keeping an eye on some of the factors that are presumably affecting price
1. Cocoa prices...is this cyclical or more secular?
2. GLP-1 drugs...I brought this up before; to what extent will these reduce consumption of sweets vs fast foods vs all food..
3. Rise of off brand ...Mr Beast and future upstarts...Monster, Celsius etc in the beverage space...
Hershey is primarily a very large vendor of relatively low-end (but well known) chocolate in the US. Their non-US business is pretty minor, almost and afterthought.
So several disparate things are working together to cap volumes. The high penetration and US focus (nobody new to sell to), the secular trend to pricier cacao since there will be a shortage of growers willing to work for so little, and to a lesser extent any competitive issues.
I think they can defend their margins--being a "low end" chocolate brand doesn't mean that even a doubling of cocoa prices will be a big worry for margins: it isn't the largest cost of a bar. They will have to pass on the costs at some point, but so will all the competition. So I think they will be more than fine financially. Mainly it's really a cap on volume growth. The volume growth, if any, may be mostly on the "salty" side. I believe they are forecasting growth around 1.5%/year in volume on a like-for-like basis, so they aren't unrealistic.
Jim
No. of Recommendations: 0
THANK YOU
And how do you think about valuation in light of the trends?
No. of Recommendations: 16
And how do you think about valuation in light of the trends?
It is not conventionally cheap. Yahoo reports a trailing P/E of 20.5 and a forward P/E of 18.8.
But it is way cheaper than it has historically been, and I don't really see the business being any worse than it was in any scary way.
So...
If the market once again assigns them valuation levels in the historically usual range (a big if), then the return outlook is:
* a one-time price bounce (timing unknown, in the general vicinity of +22% if it went back to the old normal),
* plus the usual trend of growth in value per share (usually high single digits),
* plus the dividend yield.
Darker things to consider?
* Perhaps some of the recent excellent earnings are a result of price increases at rates that can't be sustained--don't extrapolate that bit. EPS up about 10%/year in the last 5-10 years, but sales per share up only 5%/year. Great results, but that gap can continue only so long.
* They have ~$4bn in debt. There is an interest bill for that, which I presume is rising. The debt level is not a problem, but the interest cost may be a small headwind for net earnings.
Jim
