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I'm not sure that we've discussed Hershey around here much. Seeing as it is almost time for my afternoon run to the candy machine, I though I would solicit people's opinions about HSY.
Tim M. praised it in one of his recent articles, and it caught my eye in another article as well, so I decided to put it through its paces. I of course love the product, and it seems like a very well-run company, but overall I think there are much more exciting DG opportunities around right now.
The best aspect about HSY seems to be the consistent revenue and earnings growth -- the absolute foundation for a healthy company. Their dividend growth streak is only 5 years (though seems likely to be 6 soon), and the payout ratio is just above 50 percent. The current yield is an ok 2.29 percent. I love the simple business model. But the real downer for me is the price -- even after a significant recent decline, it is still trading for a P/E of about 24.
Bottom line: I'd love to own some HSY, but I don't think at this price. I know that the gist of Tim's article was that something like HSY can be a great buy even at 24 times earnings, but I am still wary. Maybe I am just one of those people who needs a bit more of a bargain.
What do you all think?
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05-28-2015, 04:03 PM
(This post was last modified: 05-28-2015, 04:11 PM by ChadR.)
It's one of the companies that is always on my watch list, but I've never bought. It might be my next purchase. Even though I think it isn't undervalued, it's at the top of fairly valued. It never seems to go on sale and now is probably a good as time as any to buy it. And I must admit reading Tim M.'s article is what is pushing me to go ahead and make the purchase.
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Like Chad, this is a company I've always followed, but never bought. Nothing wrong with buying a starter position and then adding on a pullback, but it is definitely on the high end of valuation with a PE around 23.
HRL is another like HSY that never seems to go on sale but has a tremendous track record of growth.
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I like HSY too but I cannot seem to find the chutzpah to buy some as it seems perennially overpriced. Maybe that will be the norm for a long time into the future and P/E be damned. Activist investors nor Buffet will be playing around with the stock or company since the Hershey Trust holds controlling interest in the company and they will NOT allow the board or senior management to mess with their control. Because of all this, I've never dug seriously into HSY but maybe I should. Analysts estimates for EPS growth is in the high single digits and the payout ratio stays around 50% so there's wiggle room there should things sour for a quarter or two.
You're right Eric, HRL is in a similar situation. It was on my watchlist for a very long time and finally I just moved on since it was never cheap enough for me to initiate a position. I believe a good recession is the only time you get a chance to get shares at a value but the yield is still pretty low then too.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
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Very much a Tom Russo type stock for mine, and at current levels approaching GARP, below its long term median P/E. Looking for an entry soon.
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Not sure if you've seen it yet but Hershey's is up 17/18% with a buyout bid from Mondelez.
Question for the pros who've lived through other examples, are you selling right now and cash out, or just wait and do nothing?
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Glad you started this thread, Kerim. I've owned HSY for many years. Great company, solid growth. The HSY Trust owns ~10% of the stock, but >80% of the voting rights. Therefore, nothing happens unless they approve, which brings us to today.
HSY is up 20% because Mondelez (MDLZ) made an offer to buy HSY. This seems to happen every 5-10 years, but the HSY Trust always blocks the sale. In fact, about ten years ago, all but one member of HSY's board was replaced because they were seriously considering selling. Based on that, I doubt HSY will sell to MDLZ, but it sounds like MDLZ is very committed to buying it. So, we'll see.
I was actually thinking of selling today to take advantage of this all time high and was going to ask everyone's opinion. If HSY doesn't sell, the stock price will come back down to $100, and I could buy back more shares than I have now. If they do sell, the premium may not be much more than this 20% increase I just realized today. Thoughts?
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(06-30-2016, 10:17 AM)DividendGarden Wrote: Glad you started this thread, Kerim. I've owned HSY for many years. Great company, solid growth. The HSY Trust owns ~10% of the stock, but >80% of the voting rights. Therefore, nothing happens unless they approve, which brings us to today.
I remember that last Board cleaning on the buyout offer. From an article I remember reading many years ago, the Trust is adamant about that steady income stream for its charitable work and, without them being a controlling interest in the surviving company, they won't let it slip from their grasp.
If I owned it now, I'd probably take those profits and wait for everything to settle down before buying back in. Of course, that is if I hadn't found a place for that money in the meantime.
Milton Hershey was an amazing person.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
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(06-30-2016, 05:20 PM)Dividend Watcher Wrote: If I owned it now, I'd probably take those profits and wait for everything to settle down before buying back in. Of course, that is if I hadn't found a place for that money in the meantime.
I ended up selling most of my HSY shares yesterday at almost the high of the day. I plan on buying back when it comes back down to $100/share, which I expect it to do over the next few weeks. I'll get many more shares of HSY, which I plan on holding forever. Nice little trade there.
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I decided not to sell. I could cash ~$800 but would end up paying 40% in taxes. Not worth the trouble, the plan is to buy and hold so I'm sticking to the plan!
Trying to rationalize my decision: "I'm 40% up with ADM, O and VTR in less than a year and I never considered selling, so why would I sell HSY at 35% profit to make a little more than 400 bucks?"
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(07-01-2016, 12:21 PM)Rasec Wrote: I decided not to sell. I could cash ~$800 but would end up paying 40% in taxes. Not worth the trouble, the plan is to buy and hold so I'm sticking to the plan!
Totally agree with your reasoning. My HSY is in an IRA, so I'm not worried about taxes. Just a 6.95 commission to sell, one more when I buy back.
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08-29-2016, 03:45 PM
(This post was last modified: 08-29-2016, 03:58 PM by gymchamp.)
(07-01-2016, 11:48 AM)DividendGarden Wrote: (06-30-2016, 05:20 PM)Dividend Watcher Wrote: If I owned it now, I'd probably take those profits and wait for everything to settle down before buying back in. Of course, that is if I hadn't found a place for that money in the meantime.
I ended up selling most of my HSY shares yesterday at almost the high of the day. I plan on buying back when it comes back down to $100/share, which I expect it to do over the next few weeks. I'll get many more shares of HSY, which I plan on holding forever. Nice little trade there.
Attention market timers oops I mean fellow dgi's  HSY down almost 12% after hours on Mondelez ending current pursuit of Hershey. Here's your chance to "...get many more shares of HSY, which I plan on holding forever'...or at least until there's another takeover threat 
Congrats though to anyone who did sell and will actually buy back in (let's see who does haha). Personally I don't like to gamble with my core positions, nor pay capital gains taxes, nor commissions etc.
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