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Investment Analysis Clubs / The BMW Method

URL:  http://boards.fool.com/great-post-kathy-thank-you-i-was-just-about-to-25699992.aspx

Subject:  Re: Hershey... getting sweet? Date:  7/19/2007  12:56 PM
Author:  bartlesmcbee Number:  25745 of 41594

Great post Kathy, thank you! I was just about to post something similar (though not nearly as comprehensive:)

After having taken a small position a few weeks ago in HSY, i've been pondering whether or not I would add/double down in the mid-high 40's - looks like we may be there soon. I believe BMW picked up some shares months back (or suggested them for his wife?) Particularly compelling was the fact that HSY continued to bounce off of its 13% CAGR over and over (Graham's chart)

I don't know if it's just lip service, but HSY management's words strike me as encouraging >>

" Our number one priority is to restore Hershey's marketplace momentum within the U.S.," said Chief Executive Richard Lenny on the conference call. "We weren't as prepared as we need to be in explosive growth in premium. We haven't seen a turnaround as quickly as we'd like ... "

I'm still quite the rookie when it comes to understanding and implementing the BMW method, but I do recall Jim explaining that the BMW method works in great part due to a company falling on hard times & responding to the challenge by working that much harder to return to solid growth rates - workers and management working harder than ever to reclaim at least that average CAGR for us patient investors.

It reminds me of how the basketball/football team that trails badly during the game nearly always narrows the margin late in the second half. Similarly, the more desperate (falling behind) management becomes, the more they struggle to streamline and innovate and succeed. Meanwhile the leading squad tends to put it on cruise control (with their temporarily high complacent CAGR) & loses the edge that provided the lead in the first place. Human nature's a rather interesting beast, and something we can profit from.

Hopefully HSY exemplifies the 'losing team' scenario and will rebound soon (no pun intended). And at a better price than yesterday, I'm paying closer attention than ever.

B-man
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