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Author: Fafar Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 41634  
Subject: Hershey... getting sweet? Date: 7/19/2007 11:56 AM
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I've had Hershey (HSY) on my watchlist for a while, per instructions from my daughter the candy junkie. She has some cash in her account waiting for a good buy on something she's interested in. Starbucks (SBUX) is also on the watchlist.

Apparently the street is not too happy with HSY's reported earnings today since the stock's down $1.94 as I type, to $48. That was my target price to start looking at HSY.
http://biz.yahoo.com/ap/070719/earns_hershey.html?.v=5

The Hershey Co. earned $3.6 million, or a penny per share, for the three months ending July 1. That compares with a profit of $97.9 million, or 41 cents per share, in the same period a year earlier.

Not counting what Hershey spent on changes to its production and supply chain, the company's profit would have been $81.7 million, or 35 cents a share, matching the consensus estimate of analysts surveyed by Thomson Financial.
--snip--
Performance was mixed in the quarter, with improving sales of dark and premium chocolate and some core brands offset by sluggish sales of other products, the company's chairman and CEO Richard H. Lenny said.

"The company's performance during the first half is not what we've come to expect or what we're capable of delivering," Lenny told analysts on a conference call. "We've completed a detailed assessment of what's working and what's not, and are making the appropriate shifts in plans and execution."


I calculate HSY's 22-yr curr cagrs at 14.72% dividend-adjusted or 15.65% non-div adjusted. 30-yr non-div adjusted = 16.84%. (Closed 7/77 at $.45; 7/85 at $1.97 according to ProphetCharts data but 7/85 at $2.34 according to Yahoo.)

It's sitting lower than its lowest CAGR according to GrahamInv's chart, but would only hit -2 RMS at $44.43 according to Sheridan's spreadsheet (avg cagr 12.21%/curr cagr 11.09%)

The stock price has been dropping since 5/05 from its high of $64.13 and today's big drop might start another selloff to take it to Sheridan's low.

As for catalysts to send it back up, the end of the article has a few to look into:

In February, Hershey announced a major restructuring designed to cut costs and excess production capacity in the United States and Canada, while expanding in Mexico, China and India, where labor is cheaper and Hershey hopes to sell more candy.

Since then, Hershey has announced it will close six U.S. and Canadian plants and cut more than 3,000 workers in the two countries, including up to 900 at its hometown plants. It has plans to shift more production to contractors and a new plant it is building in Monterrey, Mexico.

On Thursday, it said production is underway in China through a joint venture with South Korea's Lotte Confectionery Co. and its joint venture in India with Godrej Industries Ltd. is up and running.

The joint venture with Starbucks Coffee Co. is expected to put a Starbucks-branded line of premium chocolate in a wide range of retail outlets.


Has anyone else looked into HSY yet? Any thoughts on HSY vs SBUX?

Thanks!
Kathy
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Author: bellgarde Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 25738 of 41634
Subject: Re: Hershey... getting sweet? Date: 7/19/2007 12:24 PM
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Hello Kathy, There was quite a discussion on HSY on 1/24/07 message number 19948 (thread 18 long) and I also found some reference to HSY in message 20166.

Will someone on this board tell me how to find all references to any stock symbol - I think there should be such a capability -Denny?

Bill

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Author: bartlesmcbee Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 25745 of 41634
Subject: Re: Hershey... getting sweet? Date: 7/19/2007 12:56 PM
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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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Author: auctionnoodle Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 25747 of 41634
Subject: Re: Hershey... getting sweet? Date: 7/19/2007 1:01 PM
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I picked up HSY a while back at just under $50 and I would be looking to double down if it drops at least 10% from there.

What's more interesting to me today is what TASR is doing, go baby go!

-Noodle

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Author: Fafar Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 25768 of 41634
Subject: Re: Hershey... getting sweet? Date: 7/19/2007 10:15 PM
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There was quite a discussion on HSY on 1/24/07 message number 19948 (thread 18 long) and I also found some reference to HSY in message 20166.

Thanks for the refresher Bill. I'm definitely going to look into it some more.

As part of my new in-depth policy, I went to the grocery store and bought a few products. New-ish dark chocolate line ... not bad! New cookies on my ShopRite shelf: an oreo-like outside with Reese's peanut butter creme inside. This will definitely make the stock price go up!!!

Kathy

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Author: thegreatdane Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 25776 of 41634
Subject: Re: Hershey... getting sweet? Date: 7/20/2007 12:05 PM
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Hershey announced a new product line with Starbucks. Helpful? Time will tell.

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