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(B)(N) HSY Hershey Foods Incorporated

January 21, 2014
Courtesy: Golden Monkey Food Company, Shanghai, China

Courtesy: Golden Monkey Food Company, Shanghai, China

Deal Book. Hershey’s is on a roll and chocolate is not just cacao. In December, they acquired a majority stake in the Golden Monkey Food Company (China) and are partnering with 3D Systems to print chocolate and edible foods and are also bringing their unique flavours and skills to our lunch boxes (The Street, January 20, 2014, Hershey’s Takes on Nutella, Jif, in Spreads).

The beans are tropical (and 3rd world) and much of the industry is family or privately-owned and what can be bought is not getting any cheaper. And like tobacco and coffee, there’s something sinful about it, isn’t there? Should we give it up? Please see Exhibit 1 and 2 below.

Exhibit 1: US Chocolate – Fundamentals – January 2014

US Chocolate - Fundamentals - January 2014

US Chocolate – Fundamentals – January 2014

Exhibit 2: (B)(N) The Undervalued US Chocolate – Risk Price (SF) – January 2014

The Undervalued US Chocolate - Risk Price (SF) - January 2014

The Undervalued US Chocolate – Risk Price (SF) – January 2014

We’ve included Nestlé, which is a Swiss company founded by a German pharmacist in 1867, as a role model and benchmark for what can be done.

These five companies earned $17.6 billion last year for a return on the shareholders equity of 16% and they gave 55% of that to the shareholders for an aggregate dividend yield of 2.7% added to a gain in market value of $55 billion or 19% last year.

It's OK to buy chocolate, Daddy.

It’s OK to buy chocolate, Daddy.

We also note that the market value tends to run ahead of the “fair value” so that even at today’s prices, the companies are still “undervalued” with a possible downside due to the demonstrated volatility of minus (6%) absent surprise.

They are all currently in the Perpetual Bond™ and (with the exception of the new Kraft Foods which came in at $44 in October 2012 post-IPO and is now trading at $55) have all been in the bond for several years and at much lower prices. Please see Exhibit 3 below for the details.

Exhibit 3: (B)(N) US Chocolate – Prices & Portfolio – January 2014

(B)(N) US Chocolate - Prices & Portfolio - January 2014

(B)(N) US Chocolate – Prices & Portfolio – January 2014

For more information on the chart elements and additional references to the theory, please see our Post, The RiskWerk Company Glossary.

And for more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class actionLa Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in AmericaBig OilShopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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