Recent Buy

buyFinancial independence isn’t going to achieve itself, folks. As such, I continue to aggressively put capital to work by exchanging dollars for equity in wonderful businesses that reward me as a shareholder with growing cash flow. And it’s that cash flow that will one day render me financially independent and able to live life completely on my terms.

This transaction represents the fifth stock purchase this month, and now the 60th position in the portfolio. And it also gives me exposure to a whole new industry, which I’m pretty excited about.

Jason, the chocolatier? 

I purchased 15 shares of Hershey Co. (HSY) on 6/11/15 for $90.82 per share.

Overview

Hershey Co., founded in 1894, is a producer and marketer of a variety of chocolate and sugar confectionery products. Their products are sold in more than 70 countries across the world.

Hershey has more than 80 brands, including Hershey’s, Reese’s, Hershey’s Kisses, Almond Joy, Kit-Kat, Twizzlers, Jolly Rancher, and Ice Breakers.

The company has two reportable segments, based on geography: North America (86% of fiscal year 2014 sales), and International and Other (14%).

Fundamentals

The first thing we’ll look at as growth across the top and bottom lines over the last decade. Any company, to me, is ultimately worth all the cash flow it can produce from now until forever, discounted back to today. As such, growth is a critical factor when trying to determine a company’s future potential as well as its worth.

Revenue is up from $4.836 billion in FY 2005 to $7.422 billion in FY 2014. That’s a compound annual growth rate of 4.87%.

Earnings per share grew from $1.99 to $3.77 over this period, which is a CAGR of 7.36%. Not too shabby for a chocolate company that’s over 100 years old.

The company reduced its outstanding share count by approximately 9% over the last decade, which has helped propel some of the growth in profit per share. In addition, margins have steadily improved over this time frame.

As a dividend growth investor, one of my primary concerns is that of a company’s dividend, the growth of the dividend, and the sustainability of the dividend. Hershey looks pretty strong across the board here.

Now, HSY might fly under the radar as a dividend growth stock, and that’s probably because it only has five consecutive years of dividend raises to show for itself after holding the dividend static for just over two years during the financial crisis.

However, the company has been paying a dividend to shareholders for over 80 years, so there is a rather significant and impressive record of shareholder remuneration.

Over the last five years of the dividend growing once again, it’s increased at an annual rate of 11.4%.

The payout ratio is currently quite moderate at just 52.8%. That is right in line with that of management’s long-term goal of ~50%, but the dividend has been increasing at a rate faster than EPS over the last decade. So I suspect that future dividend raises will be more or less in line with EPS growth.

The stock yields a fairly attractive 2.41% right now. I say attractive because it’s well above that of the broader market and also about 20 basis points higher than the five-year average yield for HSY.

Hershey maintains a fairly solid balance sheet, though I would like to see this continue to improve in the future. The company’s long-term debt/equity ratio is 1.06 and the interest coverage ratio is over 16. Both of these metrics have markedly improved over the last five years, and I hope that trend continues.

Profitability is robust, though it’s difficult to compare to peers because Hershey’s largest domestic competitor, Mars, Incorporated, is a private company. Over the last five years, HSY has averaged net margin of 10.43% and return on equity of 63.99%. The ROE has to be taken in context with the debt, but margin is impressive for this space.

Qualitative Aspects

The chocolate and confectionery business is attractive to me for a number of reasons. It’s simple. It’s easy to understand, and I like easy. It’s not difficult to understand their main products, how they make money, and how they’ll likely continue to make money for many years to come. This investment is dead center within my circle of competence.

There’s not much change in this industry, which, as a very long-term investor, I love. Chocolate bars are largely the same today as they were fifty years ago, and I don’t see much of a reason why that’ll be very different fifty years from now. The biggest change I see is the switch in ingredients as time goes on to address changing consumer preferences/concerns. For instance, Hershey is working incredibly quickly to change the ingredients in some of their most popular brands, moving to what they call “simple ingredients” – stuff people can understand, like milk, sugar, etc. – and the Hershey’s Milk Chocolate Bar and Hershey’s Kisses should have “clean labels” by the end of the year. This is in response to  many consumers’ desire to consume products with all-natural ingredients.

Meanwhile, Hershey’s brands dominate the US chocolate market: They lay claim to an approximate 45% market share, which is substantially higher than that of its nearest competitor. Even more impressive, this market share has been consistently increasing over the last few years. And this dominance in the domestic market gives them a massive opportunity to concentrate resources internationally as opportunities present themselves. The US market is still Hershey’s primary focus, and rightfully so, but that also means there’s a ton of growth potential abroad.

And that growth potential is possible through two avenues. The first is through volume growth and price expansion of current brands and products, as well as the possible rolling out of new brands and products. In addition, the company is aggressively acquiring outside companies as bolt-on pieces to complement the existing business. Recent examples include the acquisition of Brookside Foods Ltd. (in 2012), a privately held confectionery company based in Canada, and the acquisition of an 80% stake in Shanghai Golden Monkey Food Joint Stock Co., Ltd. (in 2014), a privately held confectionery company based in Shanghai, China. Hershey is set to acquire the remaining 20% of the latter late this year.

In addition, there’s only so much shelf space that can be afforded to confectionery companies. And Hershey has built incredible competitive advantages through the fact that it lays claim to much of that space. This gives them pricing power and economies of scale.

Their brands are well-known and allow the company to expand in other categories. Products like Hershey’s and Reese’s spreads and syrups are a good example of this.

Although major food and beverage companies are facing challenges and headwinds right now due to trends away from sugar and processed food, I believe Hershey is somewhat insulated from this due to the fact that chocolate is a treat, rather than a meal. Chocolate is chocolate; you know what you’re getting into. In addition, a new study has found that a little chocolate may actually be good for you. This seems to concur with what I’ve long understood about chocolate. And I think this plays out in their results: HSY has seen solid increases in volume lately, even while they’ve increased prices along the way.

One other exciting aspect is “Project Next Century”. Announced in 2010 as a measure to improve the supply chain and cost structure, the firm also moved production from a century-old facility in Hershey, PA to one across town that was built in 1992. The spending associated with the four-year project completed in 2014, which means cash flow should improve moving forward.

Finally, the company has incredible shareholder alignment through the structure of executive pay. The vast majority of executive compensation is tied to business and stock performance.

Risks

Although HSY maintains a dominant position in the domestic market, competition remains fierce. In addition, HSY is finding difficulty in growing abroad, especially in China. The company noted in its first quarter results that sales in China fell 47% YOY.

Input costs regarding raw materials fluctuate, which can cause oscillating profit and cash flow. The recent changes regarding ingredients will very likely add costs, and it remains to be seen how that will play out in the market and pricing strategy.

Recent acquisitions add execution risk, though HSY remains conservative regarding its acquisition strategy.

Finally, there is currency risk, though that’s not as strong for HSY since most of their business is still domestic.

Valuation

The stock’s P/E ratio is 24.15, which is just below that of its five-year average. Most other metrics are more or less in line with the five-year average as well. HSY is a stock that consistently trades at a premium against the broader market.

I valued shares using a dividend discount model analysis with a 10% discount rate and a 7.5% long-term dividend growth rate. That growth rate is well below that which the dividend has increased over the last five and ten years, but it’s also just above the EPS growth over the last decade. It’s perhaps a bit on the aggressive side, but I’m factoring in the moderate payout ratio, international growth potential, recent acquisitions, and what I see as low risk. The DDM analysis gives me a fair value of $92.02.

Conclusion

Overall, I see this as a high-quality, low-risk, easy-to-understand business that operates in a great industry that just doesn’t change all that much. Hershey dominates the domestic chocolate market as well as the domestic breath freshener mint market via great products with well-known brand names that occupy significant shelf space. And I see plenty of growth potential yet ahead, especially abroad. Although the company is having some issues figuring out their strategy in outside markets, I’m confident they’ll resolve that out via the right combination of organic growth and acquisitive growth.

The stock appears to be trading at roughly fair value here after falling more than 10% YTD, which I see as an opportunity to pay a fair price for equity in a high-quality business. I’ll never shy away from an opportunity like that. Although I’m somewhat lukewarm on HSY’s near-term potential, especially after recently reduced guidance for FY 2015, I think the next 10-20 years could be pretty exciting. And I certainly see the dividend as one that’s sustainable and very likely to continue growing at a rate well above that of inflation. The company should be announcing its next dividend increase in late July, though I think it’ll be somewhat modest due to near-term challenges.

This purchase adds $32.10 to my annual dividend income, based on the current quarterly $0.5350 dividend.

I’m going to include current valuation opinions from other analysts below, which I use to concentrate my reasonable valuation estimate:

Morningstar rates HSY as a 4/5 star valuation, with a fair value estimate of $102.00.

S&P Capital IQ rates HSY as a 3/5 star “hold”, with a fair value calculation of $94.70.

I’ll update my Freedom Fund in early July to reflect this recent purchase.

Full Disclosure: Long HSY.

What do you think about this business? Like the fundamentals and prospects? Why or why not? 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

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134 Comments

  1. Sound logic, and great addition. DM, I posted last week regarding your TRV purchase, and again I am stunned–I just added this one 2 weeks ago.

    Seems like we’re buying the same stocks!!! That’s good to see.

    Cheers buddy.

  2. Great company to own…added a little bit in my Loyal3 account last week and am looking to add more this upcoming week with the recent dip. I live about 30 mins from Hershey, PA and the place is great. They also have a theme park, hockey arena, and other attractions like Chocolate world where you get to see the chocolate being made. The lampposts in the town are even shaped like Hershey Kisses. Haha. Anyways, great buy and keep it up.

  3. Nice purchase, DM! Chocolate is something that will never go away and has stood the test of time. Have you had the chance to update your portfolio page since your latest purchases this month?

    Ryan

  4. DM,

    Interesting purchase here. Congrats on adding position number 60 to your portfolio, huge progress right there! I like your thought process and logic for arriving at the decision. Very thorough and it seems like you found it to be a great fit for your portfolio. I am interested to see how the future dividend growth plays out, especially considering the fact that the payout ratio is right in management’s sweet spot. Just looking it up, EPS growth is expected to be ~9%, so you could still realize the high growth rate that was a big part of your decision. It’ll be interesting to see how this plays out, but regardless, you added a quality stock to your portfolio.

    Congrats again on adding the 60th stock! I may have to take a deeper look at HSY now. Thanks!

    Bert

  5. Ben,

    Great minds think alike, huh? Glad to be on the same page here! 🙂

    Wish I would have purchased after reduced guidance, but my crystal ball just wasn’t working this month. But I wouldn’t mind at all seeing the stock correct even more from here. I’d probably be interested in averaging down if it drops another 5%.

    Let’s see how it goes. Glad to be a fellow shareholder and on the same ride!

    Thanks for dropping by.

    Best regards.

  6. M. Idds,

    Thanks for stopping in!

    Visiting Hershey, PA sounds like an incredibly interesting and surreal experience. I’ve never made it up there, but I may at some point in time. I love the fact that the company is sticking to its roots and still producing significant chocolate up there. And of course there’s the Hershey Trust Company, which means they’ll always be tied to the area.

    Glad to be a fellow shareholder with you. I enjoyed a chocolate bar the other day to celebrate what should be a long and healthy investments. Tasted almost as good as what should be some upcoming HSY dividends. 🙂

    Cheers!

  7. Ryan,

    Indeed. I love the simple business model that doesn’t change that much. Volume growth and price increases portend good things ahead.

    The portfolio page is updated once a month, generally right at the outset (around the 1st). The next update should occur on July 1st.

    Take care!

  8. Bert,

    Thanks! It’s been a long and really successful journey thus far, seeing the snowball grow to these levels. And I’m not even close to done yet. Still got a lot of push left in me. 🙂

    We’ll see how it goes with HSY. Flies under the radar a bit, but the fundamentals are really solid. What I really like is that a lot of things are moving in the right direction. Volume is up, prices are up, market share is up, growth is up, debt is down, and spending should also go down. It’ll be interesting to see where the company is at in a decade or so. Just hoping they get China under control.

    Thanks for stopping by!

    Best wishes.

  9. Jason,

    Who doesn’t love chocolate? Great choice and great logic! We are looking to make our first purchase towards our own ‘freedom fund’ here at the beginning of July. Looking forward to it! It’s great to keep up with your purchases and logic to help aid in our selection. While this one probably won’t fit our blossoming portfolio, it looks to be a great addition for yours! Thanks for sharing all of your hard work.

    – Mr. Retire by 35

  10. Mr. RB35,

    That’s exciting! Awesome news over there. 🙂

    Best of luck deciding which stock fits the bill for your first purchase. And I’m glad to know that these posts help you formulate your own criteria over there. I’ve got plenty more posts to come!

    Cheers.

  11. I really like HSY and think this is an absolutely wonderful company. Huge market share of a higher margin food product. And the fact that volumes have continued to increase even with price increases speaks to how strong their brand is and how solid demand is. The pullback got me interested. I own a veey tiny amount in my Loyal3 portfolio but I think HSY is a forever stock so I’ll be looking for a solid valuation to add a more meaningful bit of capital to HSY. Nice buy DM!

  12. Dividend Mantra,
    Thanks for sharing on another great purchase. Hershey will be around for many more years to come. Keep that snowball rolling right on through the hot summer. Keep in touch.
    LOMD

  13. Dividend Mantra,

    Nice buy on Hershey and great writeup. This investment is going to do well over time as population increases means more demand for their products. Who doesn’t like chocolate and plus it is cheap treat.

    This is a company that is going to well in good and bad times. Convenience stores, gas stations and vending machines usually charge a lot of money for chocolate bars whereas it is cheaper at a dollar store. I buy my chocolate bars at the dollar store, where they are always priced under a $1.00 and sometimes at the supermarket when they are on sale.

    So I will be helping your newest investment make more revenue now and in the future.

  14. JC,

    Thanks so much. Appreciate the support!

    Yeah, the pricing power is evident there, indicating that their products’ demand is somewhat price inelastic. Great brands. I like that. 🙂

    Glad to be a fellow shareholder. I’m with you on adding on pullbacks. If it drops another 5% or so, I’d be interested in doubling down.

    Best wishes!

  15. LOMD,

    Appreciate the support.

    Excited to see where Hershey is at in 10 years. If they keep up the acquisitions, they may be a very different company with a very different geographical sales mix. Exciting stuff!

    Thanks for stopping by. Hope you’re having a great weekend.

    Cheers.

  16. IP,

    Appreciate you buying up those chocolate bars. Feel free to treat yourself anytime you want! 🙂

    Yeah, HSY has a fantastic business model. And it’s fantastic in its simplicity. Great product that most everyone likes. And I think they’re somewhat insulated from some of the prevailing trends/headwinds in Big Food right now. Not totally insulated, but I think they’re in a better position than some other companies here. More people, more volume, higher prices, and more products. The future looks pretty bright for HSY.

    Thanks for stopping by!

    Best regards.

  17. Chocolate and confectionery are a sound investment for the long-term.

    Sadly, over here in the UK there is little in the way of UK-listed options. Since Cadbury was bought by Kraft there is no other major chocolate maker left. As a result, we have to start looking overseas. I must admit to not having looked at Hershey’s before. Hershey has some–predictably–very impressive looking figures for the patient long-term investor. I will have to look into it a bit more.

    I am sure it will be a “sweet” (pardon the pun) investment for you over the years, Jason. Good luck with it!

  18. FV,

    I hear you there. The P/E ratio is usually high, as can be seen with the average. It was over 27 a decade ago. Even during the financial crisis it never went below 18. And that’s in large part because the business holds up pretty well during times of turmoil. But it’s a stock that can stay overvalued for rather long stretches. Although, the returns actually aren’t that bad going back a decade, even with that high starting P/E ratio.

    Thanks for stopping in!

    Take care.

  19. TDD,

    Sweet, indeed. That’s the plan. 🙂

    It’s unfortunate that you lack options over there for confectionery, but I’d take a good look at HSY. Really solid fundamentals across the board. And it’s quite impressive how they held up during the financial crisis/Great Recession.

    Appreciate the support. Hope you’re having a great month over there!

    Best wishes.

  20. Great addition but I prefer Nestle or Mondelez. What do you think about these two companies, Jason?

    Cheers from Spain

  21. DD beat me to the line. I was going to say that you will be earning some “sweet dividends” for decades to come.. 🙂

    Chocolate makers have been overvalued for a while, so hopefully investor appetite will slow down for a while, and we see even lower prices to load up. Lindt & Sprüngli is one I have been eyeing for a few years, yet it remains overvalued. If you own the stock, and attend the annual meeting, they give you a bag of chocolate.

  22. Wow, so many buys! Congrats on adding so many great companies to the portfolio. I really like HSY; you’ve made a great purchase! I have owned it for a little less than a year. It’s hovering around my cost basis, and it’s one of the companies I’ve really looked forward to adding to. Hope to make it my next purchase in July. I like the fact that they held their dividend constant during the recession, even though they were Aristocrats before then. Just shows management will do the right thing to preserve the company’s finances, but they still care enough about the dividend to not cut it. Best of both worlds.

  23. Interesting purchase, Jason. I hadnt looked into the books of Hersheys – but looking at the overview you’ve provided, looks like a decent purchase. The business is sound and has a good future ahead. The valuation looks a tad high though, but I guess most of the food companies trade at a premium. Ive been put off in some of the other companies in the food/beverage business because of this, but I should go back and revisit to see where things stand.

    Best wishes
    R2R

  24. One of my biggest investing regrets is selling HSY 7 years ago, don’t even recall what dumb reason I used to convince myself to hit the sell button. Live and learn…maybe I’ll buy back in one of these days, should do great for the next 50 years.

  25. This is easily your most delicious stock purchase to date ;P

    You’ve really been aggressively deploying capital as of late, which is awesome. Gotta keep that snowball growing at mach speed! Keep it up.

    Cheers!

  26. Nice to have you as a fellow shareholder. One of the things I like best about HSY is that it is essentially takeover-proof as a result of the dominant voting position of the Milton Hershey School Trust. The trust did try to sell its interest in 2002 to Wrigley, but the deal was scuttled by a public outcry in opposition. Unlike many shareholders, I do not buy a stock hoping for a takeover. A buyout might provide a short-term pop in the stock price, but that’s poor compensation for losing my company’s future earnings/dividends.

  27. Jason, When this started dipping into 88’s – I wondered if you were looking to pile on. Through Loyal3, I’ve made purchases at 92, 91, and low 89’s on Friday afternoon when the news hit. With living only 45 min. away from Hershey, my family is there every summer- I’m going to keep selling pints of blood if I have to, to get 20 more shares by the end of summer. (Haha) Bottom line, like JNJ and so many others, HSY is just a “sure thing” when it comes tolong term planning. Glad we’re partners in the Chocolate dynasty known as Hershey!
    Brian
    Lancaster, PA

  28. Hmm, it dropped big time again and looks to be down to around $88. Another nice drop and I may get in also.

  29. Javier,

    If I could own only one, I’d pick Nestle. It’s an incredible company, and very diversified (both in terms of products and geographies). Mondelez is primarily a snack food company. Tough to buy either one right now with the valuations and all that, though. But, as with HSY here, sometimes you pay up for quality. SBUX is another stock I’m currently looking at that isn’t exactly cheap.

    Cheers!

  30. DGI,

    I should have beat everyone to it and wrote it myself. Sometimes I’m too focused on the details. 🙂

    Yeah, HSY is one of those stocks that seems to consistently be overvalued. Even now, it’s not exactly cheap. It’s roughly fairly valued, from where I’m standing. But it was sitting with a P/E ratio of 27 a decade ago, so I like my chances much better now. It’s a bigger company with great bolt-on acquisitions that should drive growth internationally, yet it’s actually cheaper. However, it still provided a pretty decent return over the last decade, even with that starting point. We’ll see how it goes!

    Best wishes.

  31. Interesting buy. I think you foreshadowed this purchase in a comment from another post so this wasn’t a total surprise. Wouldn’t worry too much about input costs as a risk. These companies always seem to manage to raise prices accordingly. I remember when commodities were at record highs before the recession as wheat prices climbed sky high and MCD, DPZ and other names where all hurt as input costs rose and somehow they managed to absorb the increase costs. Not a stock that I’m interested in especially at current prices/valuations but still a solid long term buy. Who knows… I can see it as a BRK buyout one day.

  32. Mark,

    I’m with you. If a company thinks it’s prudent to not raise the dividend due to financial constraints, then that’s probably what’s best for the long-term health of the company. I would never want to see management raise a dividend just to keep a streak alive, even if it’s detrimental to operations. That said, I do like to see those lengthy dividend streaks because it means that those concerns were probably never there to begin with. That said, HSY is a great company. The odds of it going out of business over the next 10 or 20 years are so low that I can’t even imagine. Thus, I view it as a low-risk stock. And I think they’re insulated from some of the headwinds plaguing other similar firms. Great brands and everything’s moving in the right direction.

    Glad to be a fellow shareholder. I hope we get an opportunity to average down a bit here. Definitely possible with the recent guidance and all that.

    Thanks for dropping by.

    Cheers!

  33. R2R,

    HSY is definitely not a stock that often trades with a low P/E ratio. It’s averaged well into the 20s over the last decade, and you can see the five-year average. But I’ve learned over time to pay up for quality when quality presents itself. SBUX is another stock I’m currently looking at paying what is arguably a premium for. But I look at companies like Hershey and try to imagine whether or not they’ll be significantly larger and more profitable (which portends increased dividend payouts) 10, 20 and 30 years from now. And I like the odds.

    Thanks for stopping in. Hope you’re having a great weekend over there!

    Cheers.

  34. Randall,

    The more I invest, the less comfortable I am with selling stocks once they’re in the portfolio. Unless a company forces my hand (like the accounting scandal at ARCP), I’m more likely to hold and see where things go. Even great companies can go through rough patches. I’ve sold some solid stocks over the years, and it’s now one of my mantras to see how long I can go without selling moving forward. We’ll see how capable I am of doing that (and how wise it turns out to be).

    Thanks for sharing your thoughts. I don’t think now’s a bad time to jump back in, but the recent guidance reduction could provide better entry points down the road. I’d be interested in averaging down if it drops a bit more from here.

    Cheers!

  35. ZTZ,

    Ha! Nice! It is pretty yummy. The chocolate’s not bad, either. 🙂

    I’m doing my best to stay aggressive. I feel that snowball lightening a bit over time, but I’m still pushing with all I’ve got. I can see the end result and it’s beautiful.

    You’re staying super aggressive over there as well. Let’s keep it up!

    Cheers.

  36. Jim,

    Yeah, HSY is structured in such a way that a takeover is just about impossible. Kind of a unique structure, though there are actually a lot of companies out there that are essentially impossible to takeover due to what’s called “poison pills”. But the Trust does some really good things there. Happy to be a part of something like that.

    Glad to be a fellow shareholder alongside you. So very excited to see where Hershey takes us over the next few decades. 🙂

    Best regards.

  37. Brian,

    Yeah, the stock is down something like 2% from where I bought. If it drops maybe another 5%, I’d be interested in adding more. Depends on what else is going on, though.

    That’s awesome that you live so close to Hershey. You get to see the success and legacy up close!

    Glad to be a fellow business partner with you in this one. I think we’ll do well. Enjoy your time in Hershey next time you’re over that way.

    Take care!

  38. Stephen,

    I’m hoping it drops a bit more. Certainly possible with recent guidance. I’d love to see it down below $85. I’d probably grab a few more shares at that point. 🙂

    Cheers.

  39. DH,

    HSY is absorbing the extra costs for now, but that’ll be passed on sooner or later. I expect they’ll wait to see how the new initiatives work out. I’m excited about that. It’s the first time in a very long time they’re changing some of their core products, from what I understand.

    It’d be tough for BRK (or anyone else) to buy HSY due to the Trust, but not impossible. That’d probably be one of the few firms that could make it happen. Hope everyone stays away, though. Looking forward to collecting rising dividends for the next 40+ years. 🙂

    Cheers!

  40. I love this company and think this is a great buy. It was one of the first stocks I added to the watchlist when I transitioned to dividend investing. I didn’t add it early on because of the slightly lower yield compared to other companies that i was focusing on during the accumulation phase of my portfolio. I still haven’t added it because of the exposure I have to that sector right now. But I think it is one of those great companies that could be a “pillar” of any portfolio sort of like WFC, JNJ, or KO just to name a few. Suffice to say, I think very highly of Hershey.

  41. BCS,

    I’m with you. It’s a really fine company. I wanted to invest in HSY a long time ago. But the combination of the short dividend history, low yield, and what I thought was chronic overvaluation kept me on the sidelines. But the stock has been essentially flat over the last two years while earnings and the dividend have risen sharply, so I found it a lot more compelling now than really at any point over the last few years. Still not real cheap, but roughly a fair price for a really solid company with seemingly low risks and bright long-term prospects.

    Thanks for dropping by. Appreciate the support. Hope all is well over there!

    Best wishes.

  42. Looks like another quality investment Jason, with some great analysis and numbers to back it up as usual. Good point about the RoE too, and being aware of the associated debt levels. This is where that broader experience investing and good financial literacy is invaluable to avoid falling into some simple traps where on the face of it, the numbers could look good.

    I really need to broaden my investing horizon beyond the shores of Australia. There just isn’t the same depth of quality companies like this and many others you’ve purchased over the years. At least I know where to come for some good investing ideas 🙂

    Cheers,

    Jason

  43. I became a shareholder of HSY this month as well and it’s a position that I’m really excited about. A company that turns sugar and cocoa into some of the most iconic and profitable products on the market…what’s not to like? I signed my shares up for the DRIP program and am looking forward to watching how they compound over the next twenty or thirty years and beyond.

  44. Jason,
    Nice. You are not holding back this month!
    I have this on my general watchlist since last year, but haven’t pulled the trigger due to the lower yield and slightly high debt/equity. I really like the other fundamentals of the company though (high margin, ROE, wide moat, A+ credit rating). The FCF also covers the dividend nicely (with the exception of 2009).
    Good job again!
    D4S

  45. Jason,

    I can imagine you’re a bit limited over there in Australia. I’ve noted before how fortunate us investors here in the US are, being based in a country with the most robust stock market in the entire world. And that’s why it’s almost comical more people aren’t sitting on incredible stock portfolios and financially independent. But technology has made it a lot easier to diversify internationally, which is fantastic.

    Thanks for stopping by. Happy to share. Hope you found some value in the post! 🙂

    Cheers.

  46. Chris,

    Glad to be on board with you here. Couldn’t agree more with you. Tough to dislike profiting from chocolate. If it works for Buffett (See’s), it works for me. 🙂

    Nice job there setting it up on a DRIP. Just collect dividends, reinvest, and enjoy!

    Best regards.

  47. D4S,

    I hear you there on the balance sheet. I’d like to see it improve a bit. Although, it’s not uncommon for this space. It’s considerably better than, say, Pepsi’s balance sheet. Even better, it’s markedly improved over the last few years, where a lot of other firms have deteriorated their balance sheet. That has to be offset with the benefit of cheap debt, but HSY is being managed pretty well.

    The FCF looks really strong here. And it should improve with the reduced spending. Much better than, say, CVX, where you see FCF routinely short of covering the dividend. All in all, pretty solid.

    Thanks for the support. Let’s keep it rolling! 🙂

    Take care.

  48. I bought this stock as well after peeping on twitter 🙂 Thank you. Now which one (or 2) would you consider if you didn’t own any of them for long term: CVX, XOM, WMT, TROW, OKE or GSK? Please advise. Thanks

  49. Harry,

    Thanks for following along on Twitter! 🙂

    That’s a tough call there. I’d argue that WMT and XOM are the lowest-risk stocks, but TROW is the highest quality, in my opinion. If I had to choose only two, I’d probably pick XOM and TROW. GSK is my least favorite. Poor growth and poor fundamentals, though the new partnership with NOV is exciting.

    Have fun shopping.

    Best regards.

  50. The problem with HSY is their hersheys kisses are very addictive. I can eat a party bag no problem. Then I feel pretty sick afterwards. They’re also pretty expensive. I was at the store today and I can’t really believe how expensive things are. I know supposedly there’s low inflation but it sure doesn’t feel like it.

  51. Another buy? I was catching up to you for a while there, but your past month has blown me out of the water. I was close to buying HSY earlier this month, but jumped on XOM instead. PG was at the top of my watchlist on Friday, but it’s up 3%, and HSY is down 3%, and HSY is the better company…we’ll see what Monday brings.

  52. Justin,

    I’ve never felt more aggressive than I do right now. The more I invest, the more I want to invest. The more dividend income I generate, the more I want to generate. And the higher I climb, the more I want to see the view. 🙂

    I’m probably done for the month now, though I do have four more articles coming online over the next week or so. I doubt I’ll fit in a 10th purchase this month. But I’ll be back at it in July.

    Hope Monday brings you some solid opportunities. Maybe we’ll see HSY drop another couple percentage points. I wouldn’t mind that at all!

    Cheers.

  53. Jason,

    Being a life time buyer of Hershey’s as well as other chocolate its great to see you purchasing this company. Not only that I’ve spent years in retail and know how they often sell Hershey products as a special at front registers and even give cashiers additional pay for each candy bar sold and have been doing this for many many years and have no sign of slowing down. Great post and great stock.

    Tyler

  54. What an aggressive month! Keep at it!

    I own HSY, but couldn’t bring myself to buy more of this perpetually expensive company simply because of the valuation. It’s come down a bit recently, but I HATE buying anything with a P/E ratio of over 20. I have other companies ahead of it that I want to buy, so if HSY stays where it is or goes down, maybe I’ll add some more to my position in the first place.

    Whenever someone asks me about what kind of stocks they should buy or tries to convince me to buy some biotech that’s making the newest drug to combat whateveratosis infection, this is the company I tend to bring up. It’s a wonderful company that makes a wonderful product. I tend to grab a Hershey Bar, Reese’s Peanut Butter Cup, or sometimes a Kit Kat Bar whenever I’m at a corner store. I remember Warren Buffett talking about Hershey’s, saying that you’ll never go into a store that sells chocolate bars and not find a Hershey Bar. It requires no advertising, no R&D, no innovation or change, is incredibly cheap to make, and people will buy it without even thinking. It’s truly a perfect company.

    Sincerely,
    ARB–Angry Retail Banker

  55. Tyler,

    Appreciate your support. Wish I could tell you to have a chocolate bar on me. Don’t own enough shares to have that kind of clout, unfortunately. 🙂

    I’m pretty excited to own a chunk of HSY. Really solid company that just doesn’t need to really do much or innovate much to grow at an attractive clip. New initiatives regarding ingredients, new platforms, and bolt-on acquisitions bode well, however. Just a little here or there can produce outstanding results here. They just don’t need to do much. I like that.

    Thanks for stopping by!

    Cheers.

  56. ARB,

    Financial independence is the name of the game, and I aim to win!

    It’s funny you mention advertising. I’m actually watching a commercial for Reese’s as I type this up. But although they spend a healthy chunk of change on advertising and R&D, it’s probably not all that necessary. It just keeps that moat nice and wide, however. Makes sure those brands stay well-known and incredibly strong. Like I was just mentioning in another comment, management basically just has to not screw up and these products sell themselves. Add in a few really solid moves (like the move to simple ingredients, supply chain improvement, and bolt-on acquisitions for international growth) and you have the recipe for delicious returns and dividend growth. I’m getting hungry for a chocolate bar over here. 🙂

    As far as the valuation goes, it’s tough. It’s just one of those stocks that almost never trades for a P/E ratio below 20. Looks like the stock was mostly above a P/E ratio of 20 in nine years out of the past 10. Of course, you could have landed it pretty cheap in 2009. But you could have had most stocks at a great price back then. Just tough to land HSY particularly cheap. But if Morningstar and S&P Capital IQ are to be believed, HSY is at least fairly valued here, if not modestly undervalued.

    Best wishes!

  57. You’re on such a roll this month, great purchase here Jason. It’s so reassuring to me that you practice what you preach that right now is always the best time to invest. Even if a major world disaster happens, Hershey is one of those businesses that I could still see living on forever, it’s that embedded in our culture. Thanks for bringing the price drop to my attention and great job spotting the valuation. It’s looking good on fast graphs too with a blended P/E of 21.5 which is lower than the 20 year normal P/E of 22.6. I had transferred some cash to my Loyal3 account to keep chipping away at WMT, but now I’m thinking I should split it with HSY 🙂 Excellent job hoping in right now my friend. Take care!

  58. Hey Jason,

    Actually did a little research into Hershey a few weeks back. Crazy how things work. I wanted to buy an engine from someone in Bristol, and it was on the way to Hershey to be picked up by a friend. Long story, but that is how it played out and got me interested in Hershey. I kind of have a lower entrance point for this one, so it may be a while or not at all.

    Keep buying the good ones, and you will definitely enjoy FI in the near future. Good luck.

    Keep cranking,

    Robert the DividendDreamer
    AKA — Seeking Dividends

    Follow me on Twitter– Seeking Dividends@DividendDreamer

  59. Here it is! The HSY post.

    I pulled the trigger a bit faster than you (feel fantastic, DM—with your purchase—you did great!!). I’ve been waiting for HSY to be within (near) fair value for, oh, years and years of gawking. Can’t use P/E on this one. Too long and too stupid of me, in historical terms. It’s HSY! Glad to get it where I got it at 93.xx and OUT of my watch list. I am proud! I love this company. I love its birth story. I love its legacy. There is NOTHING not to love here. I love the owner’s story, I love the orphanage/school, I love the city/state involvement, I love that this is a stock that is nearly impossible for M&A. I love chocolate. Sorry, Warren Buffet and 3G, can’t touch this without approval of the populace (for now)! I feel a real sense of accomplishment in not only the wait and patience required for it to come down to Earth for a buy—but just humbled to own such a “private” (ahem, public) co. on the open market. Is it the most private co. on the open market? I would guess—yes/ high maybe, Though I originally set my buy at 88—I couldn’t help myself. I will never look back. So very long HSY and will certainly add more when I can–to sleep sweet dreams at night.

    Stop. Enthusiasm.

    Thanks for the post. AWESOME (regardless of China and every one of it’s problems).

  60. I was always interested in Hershey ever since they bought Mauna Loa Macadamia Nut Corp. back in 2004. Being that their macadamia nuts are so delicious and addicitive, HSY should never go bankrupt! Hoping the share price drops to the mid 80’s so I can finally start a position.

    They should be announcing their dividend increase sometime in July too.

    Congrats on your recent addition.

    George

  61. this one may drop more in price as it is close to its 52week low. The dividend should help while you wait.
    If it breaks it support level, it’ll drop more. Ok to add on weakness. This is best for a very long term portfolio. Don’t expect any short term price jumps.

  62. There’s a lesson for you in there somewhere. Never led solid fundamentals get in the way of a pun! 🙂

    Yes, chocolate and sweets tends to be such a resilient business to any financial turmoil (understandably).Interestingly, one of the few listed confectioners this side of the Atlantic–Thorntons–has been approached to be bought out. However, I always found the Thorntons model less attractive. It was more angled at the premium boxed chocolate market which is much more susceptible to economic factors than everyday chocolate companies like Hershey and the like.

    I have completely forgotten about Lindt, DGI. I will have to put that on analysis “to do” list.

    I agree they are almost always overvalued–and understandably so. It will be interesting to see whether people have been treating them as bond proxies or not when interest rates begin to rise. If so, prices may drop a little. We will see!

  63. Hi Jason!

    What a month it has been for you! 9 buys already, kida wish you could make the tenth buy for a nice even number 🙂 I was also fortunate to make a purchase this month as I bought a finnish elevator company called Kone. Have you heard of it? It’s one of the few companies that can make the cut to my portfolio from Helsinki stock exchange. Revenue and EPS have been growing both 9% or so during the last six years and ROE is 40% this year with very little debt. Kone has been growing faster than the market in Asia and China and I’m glad to be on board with China’s rapid growth. Kone isn’t cheap; P/E is 24 right now with five year average at 20, but I made a small purchase and hope it goes down from here so that I can average down. It might very well happen if China’s growth slows down a bit temporarily.

    Excited to hear from your GILD purchase as I have been following you on twitter and saw that the company made it to your Freedom Fund. Have a nice week!

  64. Love it! A couple weeks ago I added HSY to my Loyal3 portfolio I add to every month. Great business

  65. Jason,
    I purchased shares of HSY on Friday for just under $89 per share. Our average price is just under $93 per share because I paid too much the first time I bought shares. I believe HSY is a great long term investment unless something drastic changes. I’m always happy to see other like minded investors joining the party.
    Keith

  66. Hi Jason

    How did you come up with a P/E of 24.15. Their earnings estimate for 2015 is $4.10 to $4.18. So even if you consider $4.10 for earnings(lower projections) in 2015 and with your purchase price of 90.82 the P/E should be 22.1512.

  67. Opps

    I got is one time restructuring charges will drag the earnings to $3.7X

  68. Good day Jason may the sweetness of this company, and a delicious dividend provide all that you are looking for. have a great day Michael.

  69. Interesting buy for sure. I had been mulling over taking a look at HSY, but since I am already heavy in consumer goods, I have passed. In addition, the debt and valuation had me leery. Perhaps sometime in the future I’ll take a look and buy some shares if it makes sense for me. Congrats on building the diversity!

    – HMB

  70. I Read with interest your recent Hershey purchase. I instead bought PG for the higher yield.
    Also the stock will be much more exciting. Old management has returned and they will be selling off many parts of the business.

  71. Ryan,

    Thanks for the support. Much appreciated!

    I think HSY is a fairly low-risk business. You can see how well they did during the financial crisis, and that gives you a good idea as to what kind of resilience we’re working with here. And I love adding a business like that to the mix, and I also like lowering the overall portfolio risk. It’s nice to mix in high-yield, riskier plays like WPC with something like HSY that yields less and seems to be much less risky. Just a holistic way of looking at the portfolio.

    Would love to have you on board as a fellow shareholder. Definitely take a look!

    Thanks for dropping by.

    Best regards.

  72. Robert,

    Buying up the good ones is all I know how to do. In my mind, the future me is already financially independent. So it’s now up to the current me to buy up stakes in these wonderful businesses and develop the cash flow. One step at a time. 🙂

    Thanks for dropping by. Hope we see that price point you’re looking for.

    Take care.

  73. Kim,

    I appreciate that enthusiasm. I have to focus on the details in these posts, but I wish I could just write what an awesome company this is and leave it at that. 🙂

    It’s truly a fantastic business model. One of the few businesses you’ll run across with a market share like they have. It’s really a chocolate duopoly going on when you look at the numbers.

    Glad to be a fellow shareholder with you. I think we’ll do very well over the next 20 or 30 years here. More and more chocolate will be sold, our dividends will grow, the company will keep on humming, and the stock price will invariably rise. It’s almost too easy to make money with this.

    Thanks for sharing that. Love having long-term and enthusiastic shareholders like yourself on board here.

    Best wishes!

  74. George,

    Indeed. Looking forward to that next dividend increase. I expect it to be somewhat modest based on recent guidance and where the payout ratio stands, but they could surprise. Either way, more money in my pocket. 🙂

    I do hope we see it drop to the mid $80s. I’d probably be interested in averaging down at that point. If we see that and a solid dividend raise, we could be looking at HSY stock with a yield approaching 3%. Wouldn’t that be something?

    Let’s hope!

    Take care.

  75. Amegalo,

    We’ll see how it goes. I don’t follow charts or technical analysis at all. I follow cash flow, and it looks delicious here with HSY. 🙂

    Cheers!

  76. Sampo,

    Thank you. It’s been a really incredible month, and definitely far outside the norm. But I’ll take it when I can get it. 🙂

    I’ve heard of Kone, but I’ve never taken a look at the business. Sounds like they’re doing incredibly well, though. I certainly hope they keep that up for you and all the other shareholders.

    GILD is one of my more speculative plays, which sounds funny since it’s a fairly large company. But biopharma is a world away from chocolate. We’ll see how it goes!

    Best regards.

  77. Pat,

    Appreciate it. Took over five years to get to number 60, but it feels good to see the portfolio really come into its own. I love the collection of businesses I have here, and I’m looking forward to adding to it as time, capital, and opportunities allow.

    I’m no Willy Wonka, but it does feel good to be in the chocolate business. 🙂

    Thanks for dropping by.

    Cheers!

  78. Gremlin,

    We’re definitely on the same page here. HSY isn’t cheap, but it’s hard to argue with the quality or business model. Best of luck deciding which way to go. 🙂

    Thanks for dropping by!

    Best regards.

  79. Matt,

    Great business, indeed. Glad to be a fellow shareholder alongside you. Super simple business model that should mint money for decades to come. And I think we’ll definitely collect our fair share. 🙂

    Cheers!

  80. KeithX,

    Nice move averaging down there. Quality company, and sometimes you pay up for quality. I think we’re attending a really, really good party here. We could do worse than a chocolate party. 🙂

    Best regards.

  81. DJ,

    The P/E ratio I use (and what you’ll see reported at most financial sites) looks at TTM EPS, which I believe is $3.75 or $3.76. I’d have to go back through the press releases for the exact number.

    I don’t use a forward P/E ratio because it’s not exact. Using TTM P/E ratios allows you to compare apples to apples.

    Take care!

  82. Michael,

    I think you’re right!

    Chocolate tastes wonderful, but dividend checks are just that much sweeter. 🙂

    Thanks for stopping by.

    Best wishes!

  83. HMB,

    Yeah, it’s definitely not the right choice for everyone. I’m okay being pretty heavy on the Consumer Staples, but others prefer a different allocation. Although, their debt situation isn’t really a lot worse than a lot of other stocks in this space. Over the last five or ten years, a lot of consumer-facing businesses have really ramped up their debt loads. HSY has gone the opposite way, which I appreciate. We’ll see how it goes!

    Cheers.

  84. Amegalo,

    PG is making some pretty interesting moves over there. I certainly hope the renewed focus helps to get the company’s growth on the right trajectory once more. Certainly a pretty big gamble.

    Keep in mind that Lafley – old management – is set to leave here pretty soon, perhaps as early as this summer. He’s already laying the groundwork for that. It’s pretty interesting that he was behind some of PG’s building up and slimming down. It’ll be interesting to see how that works out.

    Best regards!

  85. I can’t speak to the company’s fundamentals. But I can say that our household is regularly contributing to their revenue stream.

  86. Hi Jason!

    I have understood that you recommend deploying capital on regular basis. That’s what you are showing with this post for example. And you have done it with great success. I have been standing on the sideline more or less since 2012. I regret that today. My portfolio (10% WMT, 10% KO, 7% PM, 7% MCD, 3% MO, 3% PEP, 2% Unilever and 8% divided in four different Swedish companies) holds 50% cash and is worth approximately 77 500USD.

    I have read your articles on holding vs deploying cash and have changed my mind. What I’m not really sure about is how i should start deploying a lump sum. I was thinking of dollar cost averaging into the market with my current cash position. What do you think about that DCA? How long time do you suggest it should take from start to 100% stocks? I’m a relatively young student and I can save 500USD/per month without any loans.

    Furthermore i was thinking of reducing my stake in MCD due to the quality aspect. Perhaps it would be better to just start rounding out the portfolio. Any opinion?

    Your sincerely,
    Alfred Sten (Sweden)

  87. Hi Dm,

    Wow what a month! So many buys. I gladly took the falling stock prices last week because of the Greek problem in the Eurozone, I managed to average down on some of my more recent buys which is great.

    Will you manage to get in a 10th buy?

    Cheers,
    G

  88. Alfred,

    Thanks for writing. Appreciate the readership from Sweden. I’m honored and humbled to have readers from all over the world. Thanks so much for that.

    Although you can regret not deploying capital earlier and/or more regularly, take comfort in knowing that you’re in an incredible spot. Being a young student with a $77k portfolio is pretty amazing, and certainly puts you in rare company. And you learned this lesson about the futility of timing the market young, which gives you incredible perspective with plenty of time to correct the behavior.

    The unfortunate part of this is that you’re thinking of now deploying capital just when opportunities are less in both number and overall attractiveness. I’m still finding great places to put capital to work – my posts show that – but I certainly was a lot more enthusiastic about valuations back in 2012.

    As far as DCA versus investing a lump sum, I prefer the former. And that’s because that’s what I know and what I’m comfortable with. Although the research seems to indicate that you’re better off just investing a lump sum and getting it over with, I prefer taking my time, picking my opportunities, and putting capital to work incrementally. What you decide to do, however, is really all up to you. But I’d make sure that you’re psychologically prepared for a major stock market correction, because it wouldn’t surprise me to see one any day now.

    MCD is still an incredibly profitable company, but some of the numbers are moving in the wrong direction. I continue to hold because I think there’s a ton of potential to turn it around, but, again, that’s an individual call. If you think your money can do better elsewhere over the long term, then it probably makes sense to make that move.

    Hope that helps!

    Best wishes.

  89. Geblin,

    I’ve heard a few things about the issues with Greece. I think I came across something that said the sky was falling or something similar, but the clouds are still pretty high in the sky. 🙂

    It’ll be very tough to fit in a 10th stock purchase. I kind of doubt that’ll happen as I also have to pay quarterly estimated taxes this month. So the cash flow is running pretty dry now. But it was fun while it lasted!

    Thanks for dropping in.

    Cheers!

  90. Hersey is a sweet stock for the portfolio. I have 270 stocks, but it is still not my full position yet. It is about 80% of my full position. I have been averaging up on my position from last 3 weeks. I would like to add more around $85. I don’t think stock is cheap but it is at price where you can start a position and it is sleep well company to own. It increase its dividend every year with good percentages except they froze during financial crises so its dividend history is misleaded. It is hard to see any take over due to its Trust structure, but whoever buy it will have to do very sweet deal to make it happen.

    I see good entry price, good dividend increases (next increase coming next month), sleep well company and its a win win situation if you will look your performance few years from now.

  91. AJ,

    270 stocks? That’s incredible. I’m obviously a fan of broad diversification and owning a slice of many, many high-quality companies as a measure of increasing breadth while reducing risk. I don’t think I’ll end up with quite that many stocks, but I also certainly wouldn’t mind being in a wonderful position like that.

    I hear you on HSY. It’s absolutely a sleep-well-at-night type of stock. You just don’t need to worry about much here. It’s super easy to understand and it would likely have to take some type of world-ending event to knock HSY out. At that point, I have a lot more to worry about than chocolate and dividends. Not sure how heavy I want to go here, but I would absolutely love an opportunity to average down a bit. It’s currently something like 2% below my purchase price, so I’m not eager to go crazy, but I’m hoping to see it drop another 5%. Of course, I’d love to see all stocks drop at least 5%. We’ll see what we get.

    Thanks for sharing. Glad to be a fellow shareholder. We have a lot of long-term owners with us on this one. That’s really great news.

    Best regards!

  92. No arguments from me here – I just myself added 4k worth of HSY last week, so thanks for feeding my confirmation bias! If I read about you getting into CMI in the next week or two I’d have to seriously reconsider reading your blog, lol…
    Cheers!

  93. Max,

    Sounds like we’re on the same page regarding HSY. Nice buy. I can’t imagine we’ll regret buying HSY here a decade or two from now. 🙂

    What’s wrong with CMI? Or did you already buy and I’d be late to the party?

    Cheers!

  94. Funny that one would buy a stock because it will be “much more exciting.” My stocks feed my children and pay for the roof over our heads. Exciting is the last thing in the world I want them to be. They should be as boring as can possibly be.

  95. Hi Jason,

    Thanks for all your great advice.

    On Friday, I was able to buy HSY, TROW, and WPC. I think they are all good LT holdings.

    I was considering BA when it was ~$140 earlier int he week – but it jumped up before I could purchase. Same on AMGN – wanted it at 154 or so, but it took off. Other considerations now are adding to my position in GPC, JNJ, UNP. Would also like to pick up MMM.

    Your thoughts on entry prices?

    Best regards,
    Howard

  96. Howard,

    Nice. We’re buying the same stocks, I see. Glad to have you along for the ride. They’re all really interesting companies with incredible business models. And they’re all in incredibly strong competitive positions.

    There are a few stocks for me that are in the “I regret not buying that a long time ago” pile. MMM is one. But the dividend growth rate was much less impressive circa 2011 before they threw a couple of monster dividend raises shareholders’ way. Nevertheless, I regret not buying it a while ago. But it doesn’t seem cheap here, even with better recent growth. Both it and GPC are trading well above their recent historical norms. GPC is one I stopped tracking a while ago due to valuation concerns. It’s down heavy YTD, rightfully so.

    AMGN is trading for a similar valuation, but has grown faster than those other two firms. It, too, is trading above its historical norm and is riskier than the other plays, in my view. Biotech has been on a tear over the last few years, but there’s a lot of potential there.

    BA is one I haven’t followed very closely. The recent dividend growth has been pretty phenomenal, though. I may have to take a better look.

    I don’t know if you’d go wrong buying any of them over the long haul, but I like UNP the most right now.

    Cheers!

  97. Jason,

    I’d be hard pressed to come up with a scenario in which anyone would regret buying HSY a decade from now, though I do hope the stock price lingers a bit at current levels, so I can add more (there’s only so much cash flow one can have…).

    Regarding Cummins, there’s nothing wrong with it – at least I hope so 🙂 – it’s just the other company I am aggressively adding to at the moment. Feel free to prove me wrong!

    Cheers,
    Max.

  98. I apologize if you covered this above but have you done any work on Kraft? Alexander Poulos has a very bullish article on SA saying its like wildly undervalued post merger. Would you share your thoughts? thank you

  99. Brazo,

    I looked at KRFT briefly a while ago and wasn’t particularly enamored with the growth, profitability, or debt. And if I didn’t really like it at $60, I surely don’t like it $90. Shareholders did well here for sure, because I don’t think the business justifies where the stock has gone. Just my take on it!

    Take care.

  100. Well done on your 60th stock. Diversifying is always good. I love chocolate myself so think this is a good buy. It would be great for you if Hershey could make it’s mark here in the UK then the profits would surely grow.

  101. today while doing some research I came across something astonishing. There is a small-to-medium sized financial coglomorate here called Kodak Mahindra Group which started operations in 1985.The group has been pretty successful but not a big brand or something.Its not even among top 10 finance companies over here.But their stock performance has been something mind boggling.
    If you had invested 1500 USD (only) as a private investor in 1985 (it was not publicly listed then) it would be more than 200 million USD today (and I m not counting dividends) !!!!!!!!! This is pretty much beyond my imagination !!!
    Mr.Buffet , you listening ??? 🙂 🙂 🙂

  102. Hey Jason,

    My first post here, I always read your blog and its really great 🙂 Started myself in dividend investing in last year december.
    I want to invest this week this week in my portfolio, add stocks to it or buy a new company.

    Currently I have AFL/AAPL/T/BBL/KO/CL/XOM/HP/JNJ/MCD/NOV/PM/Shell/South32/UL/WFC

    What’s your opinion in add stocks or just buy a new company?

    How about your opinion on Maiden Holding? Looks like a solid company.

    Greets,

    Remco – The Netherlands

  103. I’m actually surprised by some of the fundamentals! In a positive way. I thought the payout ratio would have been higher. That’s probably because I hardly see where or how this company can growth on a long-term perspective. Especially in finding new markets. It seems difficult for them. But like you mentioned, the clean labels will surely help maintaining a large numbers of loyal customers (and maybe a little more).

    Overall, a great buy!

    Cheers,

    Mike

  104. Laura,

    I love chocolate as well. Invest in what you know, right? 🙂

    They have a lot of international expansion potential, which is partly why I like them so much. In the meanwhile, the currency issues plaguing other firms isn’t harming HSY as much due to their insulation here in the US. Nonetheless, they’ve done well with focusing on the domestic side, so there’s still a lot of growth yet ahead.

    Thanks for stopping by. Hope you’re having a great month over there!

    Cheers.

  105. harsh,

    Wow. That’s pretty incredible. I’ve never heard of them before. Pretty crazy.

    I read a lot of stories/articles indicating how it’s nearly impossible to beat the S&P 500 over the long term and all that but then I run into a ton of companies, funds, and investors that have done it for years and years on end. However, the media wants you to believe that it’s almost impossible. Not that it matters to me whatsoever, but I’ve handily beat the S&P 500 the last I checked (end of last year) and I wasn’t even trying, nor did I care.

    Thanks for sharing!

    Best regards.

  106. Remco,

    Thanks for the readership. And thanks as well for stopping by! 🙂

    I really don’t recommend stocks or investments for others, however. And that’s because we’re all different in regards to our income needs, time horizons, risk tolerances, and circle of competences. That said, I think most of those stocks are high quality and trading for attractive valauations right now. NOV is trading at book, which is well below its 10-year average. I just recently purchased more AAPL because it’s a small position for me and I still see value/potential there. XOM is a solid long-term play, though I’m heavy on energy.

    I don’t really follow Maiden. I’d just recommend caution due to its size. I’ve seen small insurers run into problems before when abnormal claims hit them.

    Hope that helps!

    Cheers.

  107. Mike,

    Yeah, I disagree with that. I think when you have a company sourcing less than 15% of sales from international markets but still growing at a really attractive rate (just focusing on domestic), that leaves a ton of growth potential – organic and through acquisitions. It’s really large companies that have already tapped the international markets in a big way that I think are far more limited in regards to growth potential.

    A little volume growth, small price increases (at least in line with inflation), and share buybacks alone can lead to growth in the upper single digits for HSY. The fact that they have so much room to run on the international side is a real positive, in my view.

    Cheers!

  108. Then you Sir have been very lucky 😉

    I guess its hard to consistently beat the S&P. And I disagree on what you say about the media. They clearly want you to trade in and out. And adjust everytime the market flickers to one or the other side. Media basically talks the book of brokerages and investment banks.
    Actually it would be good if the media advised the average investor to just buy into an index via low cost ETFs. But this is just not what they are doing (see Mad Money or the likes)
    Best wishes and keep it up!

    PS: I so far failed terribly trying to beat the S&P. Hope the performance will catch up eventually. If not I might consider for myself what I just wrote haha

  109. Hi Jason,

    Thanks for your reply, indeed everyone got there own journey 😀

    I just bought some OHI and XOM 😀 still an attractive valuation, hope to buy some nice stocks next month again or in 2 months 😉

    Keep on writing and I can’t wait till the next read 😀

    Greets,

    Remco

  110. investing0711,

    Not so sure how much luck really has to do with it. I’m lucky to be born when I was in a first world country, and I’m fortunate to have so many resources at my disposal. But most everyone born in the last 30 years in a first world country has those resources and luck as well. But luck didn’t place the 60+ stocks in my portfolio. I did.

    As far as the media goes, I disagree. CNBC isn’t the entirety of the media. I read stories every day – the stories I was just referencing – about how the average layman can’t beat the market, so you may as well just buy the market. Keeping in mind that the S&P 500 isn’t magic… it’s still just a group of stocks picked by a committee. But then they go on to cite that people don’t beat the market because they trade too frequently, and panic/sell when stocks go down… as if owning an index fund is a panacea. If you’re the type to panic when JNJ drops 10%, you’re probably the type to panic with VTSAX drops 10%.

    Anyway, I’ve lost my appetite to argue these points. You can put together 30+ years of incredible performance and people will still try to rationalize it as luck. I’ve seen it happen with Buffett. Funny how the world works. My results are there. Maybe Luck will stop by my apartment later this evening and tell me which stock to buy next.

    Cheers!

  111. DD,

    Couldn’t agree more. Just had a little chunk of dark chocolate with almonds earlier today. 🙂

    Thanks for dropping by!

    Best wishes.

  112. Hey Mantra,

    As a long time reader all I can say is: Wow, I finally get to comment that I also recently purchased Hershey (on June 19th). I wondered if/when I would ever get to be like these other commenters that happen to buy shares in a company around the same time you did, and now I’m part of that club! (if a club even exists, haha). This past weekend I walked around some stores and coincidence or not, started noticing far more Hershey’s displays and products. At one display that had syrups for sale, I was checking out items on the shelf when I stepped aside to let a man and his daughter pick up some Hershey’s syrup. You and I each got a tiny piece of that profit! 🙂

    Take care,
    Mike

  113. Mike,

    I’m so glad to hear that. We’re on the same page at the same time here. Not sure if there’s a club, but I’m glad to have so many great long-term shareholders with me on this one. We’ve got a lot of people that are likely going to make plenty of money on this over the long haul. And if we do form a club, it’ll be Hershey’s bars at the monthly meetings 🙂

    And it’s funny you mention that, but I do the same thing. I start to notice products/services a lot more after I buy stock in a company. I’ll try to see how many cars are in the parking lot of the local McDonald’s or what kind of groceries/cleaning products are in people’s carts when they’re shopping. All in the name of being a more informed and aware investor. And it’s all part of the fun.

    Thanks for sharing!

    Best regards.

  114. harsh,

    Nice. That’s good news there out India. The runway for growth for the electronic payment companies like V is really incredible when you look at the volume of cash transactions across the world.

    Thanks for sharing that!

    Best regards.

  115. Hi Jason

    Hershey caught my eye a bit earlier than your but I joined the club just today 🙂 Better late than never. Bough some shares as they came down a bit more.
    I had my mind set on a FV estimate at a bit under 90 bucks and finally pulled the trigger at 88.19. Still a bit high a price but I feel pretty confident that we’ll both be happy 10, 20 or 30 years down the line.
    Buying these high quality companies can be a learning experience (i.e. gaining more patience to wait as the price stays up). I can certainly still use some training (that’s for certain).
    Buffett has used Hershey as an example of a wonderful business on many occasions. Wonder when he’d start buying. Well, we may never know.

    No Hershey bars widely available in Helsinki, Finland but I found a store where I can get some. I have funny feeling I’m gonna sample some of our own merchandise… 😉

    Cheers

    Jarmo

  116. Jarmo,

    Glad to be in the same club. 🙂

    I agree that HSY isn’t cheap, but it’s now cheaper than it’s been at many points throughout the last decade. And I doubt we’ll somehow regret owning a slice of this chocolate empire over the long term.

    Definitely recommend trying a taste of the goods. I bought a Hershey’s bar not too long after buying the stock just to make sure the quality was on the up and up. We’re all good!

    Best regards.

  117. Hey Jason,

    You have good reasoning in purchasing your HSY shares. The market share is enormous in the US here, it’d be great if they could increase their reach in China too. I wonder what they’ll do about that. For sure they can expand globally.

    Best regards
    DB

  118. DB,

    They’re really dominant here in the US, which I think allows them some flexibility to divert resources opportunistically in the international space. The recent quarter didn’t look good for China sales, but I’m investing for the next 40 years, not the next quarter. I think they’ll sell plenty of chocolate bars over the next few decades. 🙂

    Hope all is well!

    Best regards.

  119. Kind of surprised you didn’t mention in your review (or that any commentors missed it) but in the US Hershey is the producer/distributor for some of Nestle products (Kit-Kat and Rolo for example)

    I’ve owned Hershey for a couple years, it’s a great one to have

  120. Nick,

    I listed Kit-Kat as part of their portfolio of brands. I didn’t list all brands, agreements, or acquisitions because the post would be far too long. But annual reports/10-Ks are out there for those interested. For all intents and purposes Kit-Kat and Rolo are brands for HSY since the US is by far and away their largest market and they reap the rewards of that. But you’re right in that NSRGY has the rights ex-US.

    Glad to be a shareholder with you. Selling chocolate is pretty much a no-brainer. Looking forward to collecting growing dividend income for decades to come! 🙂

    Cheers.

  121. Congratulation Jason for your new purchase. I see you really did a thorough background check and analysis of Hershey, thank you for the valuable information. Personally, i prefer going for High-quality, low risk business shares that have a tendency to grow.

  122. Chella,

    “Personally, i prefer going for High-quality, low risk business shares that have a tendency to grow.”

    I’m pretty sure that’s what HSY is. 🙂

    Take care!

  123. Hey Jason,

    Congrats on the new buy! HSY isn’t going anywhere and will earn for decades to come.
    The low international growth is very deterring to me, not just China, but Europe as well. Hopefully it picks up for you and other shareholders.

    I agree with you, HSY is fairly valued. I don’t think you overplayed for this company. Premium companies at a fair price is something I have no problem with, especially with a 15+ year timeline.

    All the best
    Duane

  124. Duane,

    Thanks for dropping by!

    Yeah, HSY isn’t cheap here. But I also never have a problem paying fair price for an excellent business. And HSY is currently sitting at a P/E ratio that is less than what it was a decade ago with arguably much greater growth potential now than before. We’ll see how it goes.

    Have a great weekend over there. 🙂

    Best regards.

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