Brian Madden Hershey Foods Corp HSY-N HOLD Jun 21, 2024

All 3 picks today are contrarian value propositions. Stock was crushed by skyrocketing price of cocoa. Nothing lasts forever. Cocoa's rounded over, and now the chart for HSY is ticking up after it based for a while and broke out. Fundamentally, the problems will get sorted, cocoa will be cheaper, and HSY profits will go up. Yield is 2.6%.

An example of how the fundamental story and the technical chart work together. 

(Note the short timeframe.) He has about a 2% position. Likes that it has support ~$190 or so. Will be resistance ~$200. If it breaks out, lots of space ahead to move. Increasing price of chocolate caused stock to tumble, but now chocolate's moving down, so he's hoping for a breakout.

But if it breaks his stop-loss support level, he'll be out.

Didn't work out, sold around $200. Thought brand was bulletproof. Input inflation was endemic to the whole industry, but then volumes started to be affected. Accounting transition hiccups. Cocoa prices spiked, but have relaxed. K-shaped economy has lower-income consumers really picking spots for indulgences.

It hit a 52-week low today. Pays a 3.6% dividend, which can't compete against interest rates. Still sells at 16x PE. Maybe he will consider it at 14x PE. Look at Mondelez instead.

Sold early September last year. Thesis was negated by the facts. Inflation in cocoa; iconic brand carried them only so far, and eventually consumers pared back purchases. 

In the face of a stock-picking mistake, try not to compound it by digging in your heels and making up a narrative to support holding the stock. Rip off the Band-Aid, choose again, and avoid the opportunity cost of further drawdowns.

Sold in September. Drought drove cocoa prices up. Passing prices on to consumers eventually made people close their wallets.

Decent company. Driven by acquisitions. He's not knocking it, but he owns LISP instead, which has done significantly better (unfortunately, it's $20k a participation share, with a common share being over $200k CAD). There's also the currency benefit on LISP.

The CEO of Wendy's left to lead this. Why? Wendy's is an ailing company. This CEO introduced dynamic pricing in fast food which failed. Shares are sinking.

Peaked in 2023 and then downtrend until middle of this year. Chart shows really nice base forming, with early-stage accumulation. Watch to see if it continues or levels off; so far so good. Made a higher low back in the summer and now steadily climbing. Resistance ~$200 -- if it breaks out above, looks really exciting.