Hershey (HSY) has been making headlines recently, and the stock’s price swings have been uncharacteristically sharp for a company known for its steady, reliable growth (9% three years annualized). As a long-term investor, this volatility presented a unique opportunity, and I took advantage by locking in gains in three increments as the share price appreciated.
Dividend Yield Decline and Profit-Taking
One key metric I monitor is the dividend yield, which naturally declined as the stock price surged. This signaled a chance to capitalize on the elevated valuation, and I began trimming my position. However, with the news of a potential acquisition by Mondelez International (MDLZ), Hershey’s stock has become even more interesting.
Mondelez Acquisition: A Likely Stalemate?
The prospect of Mondelez acquiring Hershey has resurfaced, but history suggests that skepticism is warranted. According to analysts at Barclays, any potential offer would likely need to exceed $240 per share. However, the biggest hurdle is the Hershey Trust, which holds 80% of the voting control. Any sale would require not just the approval of Hershey’s board of directors but also the Hershey Trust’s consent—a challenge that has derailed similar attempts in the past.
This makes it unlikely that a deal will proceed, even if Mondelez remains interested. For Hershey investors, this could lead to heightened volatility as speculation ebbs and flows, but it also reinforces the value of Hershey’s independence.
The R.M. Palmer Plant Explosion in Reading PA: A Competitor in Crisis?
Adding another layer to the confectionery industry’s recent turbulence is the explosion at a R.M. Palmer plant, a strong competitor in the space. While the incident is tragic and disruptive, it may inadvertently strengthen Hershey’s position in the short term by reducing competitive pressures in the market.
Hershey is #1 in U.S. Confectionary and #2 in Snacking. It seems these segments have had pressure from the recent introduction and breakthrough of weight loss medication and a reduction or disruption in the segment could be impactful in the near future.
Buying Back Into Hershey
After taking profits on Hershey during its run-up, I’ve started repurchasing shares as the price declines. This morning, as the pre-market showed continued downward pressure on HSY, I kept a watchful eye, ready to rebuild my position. Hershey’s fundamentals remain strong, and the temporary noise surrounding Mondelez and external events could create an attractive entry point for long-term investors.
My Thoughts
Hershey’s recent volatility underscores the importance of staying disciplined and opportunistic as an investor. The combination of acquisition rumors, external disruptions, and fluctuating sentiment has created a unique landscape for HSY. By focusing on the company’s long-term value and seizing opportunities during market overreactions, I’m confident that Hershey will continue to deliver sweet returns for years to come.
As the market opens, I’m poised to act—ready to enjoy another bite of Hershey’s enduring legacy.
