The Hershey Company (NYSE:HSY)

For reference point and to allow for comments by others. As of the end of March, 2013.

ROE 70.48%
Trailing PE 29.06
PB 18.25`
Div yield 1.90%

Stock is over-priced even more than market.

who doesn't love chocolate

Overvalued.

I love chocolate, so does everyone else.

BRAND Easy to raise prices,
Capital equipment paid for

117. The Hershey Company (NYSE: HSY) is ridiculously overvalued. I guess this shouldn't surprise me because so is Tootsie Roll Industries (NYSE: TR). I'm downthumbing them both. Hershey should be trading between $50-$55, but the redthumbing at present is mostly because they are trading at the top of their channel. Expect them to fall below $58. There's a new analyst that I've never heard of: "Ticonderoga" that apparently assigned Hershey a price target of $66. Unbelievable. Who are these people? For the most part, Hershey is trading above the other analyst estimates. Look out below!

even during the upcoming recession, we will love chocolate

Well known brand with strong dividend. Incoming CEO may make them an even better company.

HSY   WEST DAVID J   Executive Vice President   May 25   Sale   54.10   571,100   $30,898,691   126,031   

They have to explore different new flavours, at which chains like Ghirardelli and Godiva are extremely good...But, We do see that Hersheys is a Poor Man's Godiva and although they'll continue to stick around, I don't see much of a growth for them....

The expenses related to the more efficient supply chain are in the past and now they will use some of those cost savings for advertising and growing the iconic brands.

Almost time to get Valentines Day candy.

Piotrosky screen.

I don't see much I like here (besides their product), but I am testing a strategy here.

Just how threatened by store brands and substitutes do you think Hershey is? Their product is always the last thing you see just before you check out at many places. It just isn't worth taking a lower-quality substitute when you're probably eyeing a candy bar that costs less than a dollar, anyway. Their products are ubiquitous. You see them everywhere. I think we have a moat here.
Now let's look at why I think it's a good pick and won't tank my CAPS score.
The same reason it would be a good investment in real life, of course. Because I don't 'play to win' at CAPS. I make picks based on whether I believe they would be good choices if I were looking at going in with real money....like I think everyone should.
Because if you don't, your rating and score means nothing to me.
They have a good bit of debt, but it isn't a problem, since interest coverage is 12.5.
Return on equity is 69.2% as listed in CAPS land...while Yahoo!finance lists a return on equity figure of 86.6%. Either one is fine with me.
How about earnings?
Their current PE is 22.6
Yahoo!Finance lists their forward PE at 16.94.
5-year high PE listed here at Fool is 61.
5-year low PE listed here at Fool is 15.9.
Trailing 12 months EPS as listed at Yahoo! is $2.10.
Consensus estimates for EPS 12/2010 are $2.53.
So they're up just a little from their 5-year low PE valuation but earnings are expected to pick up about 20% over earnings shown for the trailing twelve months. Good.
They've raised their dividend for decades. Until 2009. The last dividend payment in Dec 2009 marked the 10th consecutive quarter that they paid the same dividend. It cost them their dividend aristocrat status.
In March of this year (2010) They resumed dividend increases, raising the dividend 7.56% from the $1.19/year they had paid for the last two years to the $1.28/year which is where it stands now.
They lost their aristocrat status but they never cut the dividend. In my opinion, they are not only not going to, but will resume regular dividend increases again.
Dividend yield is currently 2.7%.
So how well is this dividend covered?
The dividend payout ratio is 59%. Hey, just a few months ago the last time I looked at it, it was 63%. Earnings ARE picking up.
Jordan DiPietro ("How Safe Are Kraft Foods' Dividends?") has a table comparing Kraft's cash flow coverage ratio to other companies in the article I have in parenthesis. Hershey's cash flow coverage ratio is 2.71. Take your calculator and hit the 1/X button, and what you find is that hershey's dividend only requires 37% of it's free cash flow.
It has a beta of .32. It won't rise as fast as the indexes but it won't fall as fast either.
Slow and steady and a dividend that is most likely very safe and should continue to grow.
Have a candy bar.

Hershey with Almonds is my favorite candy bar.

This investment tastes as good as Hershey with almonds and great dividend to boot. Dominates candy category on grocery shelf because everything they make tastes great.

outperform

I am bullish on HSY for 1 Year at this point. MACD is above the signal line plus this cross has happened below 0; which translates to a bullish uptrend.

Normally I only invest based on "value investing" HSY has a low BV, so it is wise to keep an extra close eye on it, though its standing in history should ease any uncertainties you have.

If this business with Cadbury goes down we can see a lot happen. But I'm not buying the stock just for that, it is a solid company.