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Hershey: The Perfect Recession Investment?

by: Stephanie Grimmett October 09, 2008 | about stocks: HSY    

Stephanie Grimmett

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Think back to those halcyon days of summer, when we thought Bear Stearns was going to be the worst thing to happen in the credit crisis, before Fannie (NYSE:FNM) and Freddie (NYSE:FRE) moved back in with dad, before "Lehman" became a word whispered in the hushed tones reserved for the dear departed, back when our biggest concern was oil prices. Five-dollar gas doesn’t seem so scary now that the Dow is crumbling, AIG belongs to the government and $700 billion dumped into the financial system did little to halt the downward progress of every stock you own. Those were nice days.

But in June, when we still believed the credit crisis was just going to mean a couple of years of unpleasant quarterly reports from the financial sector, The Hershey Company (NYSE:HSY) was hitting a 52-week low. The company bottomed at $32.31 as analysts (and the rest of us, too) speculated on the company’s profit margins, what with the rising cost of commodities like cocoa, sugar and soy lecithin.

Hershey insisted it still saw a 3%-4% sales growth, which, at the time, we didn’t believe. But the company has kept on target with an 11% increase in prices, and a lot of penny-pinching in the production side. Hershey renewed the faith of its followers by holding its dividend at 30 cents in August. And HSY saw a nice pop from rumors it was in talks to sell to Swiss mega-brand Nestle (NSRGY.PK).

The stock is on a nice dip right now, making it the perfect time to snap up shares on the cheap. But if you do buy in, watch the price carefully. If HSY falls below its most recent bottom of $36.09, sell out. Dipping below its adjusted bottom means its momentum is no longer strong enough to defy the market.

With that being said, Hershey may end up being the perfect recession investment. Chocolate is still cheaper than alcohol, and you won’t get fired for consuming an entire container of Kisses at work.

Disclosure: none

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This article has 3 comments:

  •  
    Oct 10 11:40 AM
    You are right, in good or bad times, sweet products always sell.
    That's why the supermarkets always put those Nestle bars next to the check-out counters. One out of 3 will grab a few bars as they wait in line.
    9 out of 10 kids will grab even more.
    Reply
  •  
    Oct 10 05:23 PM
    its not such a good product anymore."how sweet it is"maybe or not.
    Reply
  •  
    Oct 13 04:36 AM
    "Chocolate is still cheaper than alcohol, and you won’t get fired for consuming an entire container of Kisses at work."
    That's assuming you still have a job. Given the rising unemployment levels, the rest of us will be drinking before noon, while investing in BUD and DEO :-)
    Reply
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