Sunday, December 20, 2015
Thursday, December 17, 2015
Wednesday, December 9, 2015
Saturday, December 5, 2015
Friday, December 4, 2015
Sunday, November 29, 2015
Robert Ruden: The Real Big Lebowski
Robert L. Ruden, 69, Topeka, died Monday, Nov. 23, 2015, at Midland Hospice House, Topeka. Robert was born Dec. 3, 1945, in Los Angeles, CA, the son of Julian and Frances (Grinstein) Ruden. He attended Chadwick School and graduated from Beverly Hills High School. He earned a degree from Stanford University. He ran a paint company in Los Angeles. He came to Topeka in the 1980s to get help from the Menninger Clinic, liked Topeka and stayed. He opened a surgery center and later sold insurance. He was founder of the Smith Ruden Foundation. Robert was a genuine character, known for his wit, humor and outgoing personality. He was an advocate of Dr. Karl Menninger and the Menninger Clinic. He promoted the legalization of marijuana and was proud of his Jewish heritage. He collected model Lionel trains, followed the stock market, talked with friends and watched movies, perhaps his favorite was the Big Lebowski. He lived in downtown Topeka for many years. Robert and his first wife Anita were married in the 1980s, had a daughter, Mallory, and lived in Topeka. They later divorced. He was married to Cassandra Smith, they lived in Topeka but later separated. Survivors include his father and step-mother, Julian and Alma Ruden, Los Angeles; grandson, Tyler; brother, Josh Ruden; and significant other, Darla Hernandez, Topeka, and Darla s son Zachary Hernandez. Robert was preceded in death by his mother, Frances, and daughter, Mallory. Graveside services will be at 1 p.m. Tuesday, Dec. 1, 2015, at Mount Hope Cemetery, Topeka. Penwell-Gabel Mid-Town Chapel is in charge of arrangements. Memorial contributions may be made to Midland Care, The Villages or the Menninger Clinic.
Tuesday, November 17, 2015
Tuesday, November 3, 2015
Hershey Is Like A Bond Yielding 2.6%
Hershey Is Like A Bond Yielding 2.6%
Summary
Hershey (HSY) lost -8% of its market value after Q3 results.
Strong U.S. dollar hurts international sales of Hershey products.
Hershey stock is a reliable dividend play with a yield of 2.6%.
In the early 1990s, I met a Greek businessman named Pete Valonis, who owned the Candy Kitchen & Cafe in Grand Island, Neb. He told me to buy Wrigley stock and never sell it. I made 10% to 15% annual returns on Wrigley stock for 15 years, until the company was purchased by Mars in 2008. I used the proceeds to buy stock in the stock market crash. Among those stocks was Hershey (NYSE:HSY), which has a domineering position in the candy, gum and chocolate space. I always felt Hershey was slightly inferior to Wrigley's product mix, Wrigley is king of the gum and mint business. But Hershey's Kisses and Reece's Peanut Butter Cups have never lost their popularity. Warren Buffett likes the candy business very much. See's Candies is among the highest returning investments he ever made. Growing up in Nebraska and Iowa, I grew fond of Buffett and followed him with investments in the candy business as well as railroads and utilities. All three sectors have been very profitable for my portfolio.
I bought a lot of Hershey around $50 per share in 2011. I added to this position every year until I was overweight Hershey with the stock representing one fifth of my portfolio. I sold this position around $100 per share in early 2013, and then started buying the stock again around $90 per share.
Hershey stock is down 14% year to date. Hershey had been trading around $95 per share, but fell 8% to $87.50 after HSY reported lower-than-expected sales and cut its profit forecast for the year. Sales were $1.960 billion compared with $1.961 billion for the third quarter of 2014. Net income for the third quarter of 2015 was $154.8 million or $0.70 per share, compared with $223.7 million or $1.00 per share for the comparable period of 2014.
Hershey used to be largely a domestic play with dominance in North America, but about 10 years ago, the company dedicated itself to growing international sales at a faster rate, growing markets in Latin America and Asia. About two years ago, Hershey agreed to buy 80% of Shanghai Golden Monkey for $584 million.
The international struggle
During the Q3 conference call, Hershey officials said China chocolate category performance continues to be below the historical CAGR growth rate of 11% to 12%. In Q3, chocolate category performance was sluggish in both hyper and small format stores. China Q3 chocolate category growth was 4%, less than June year-to-date growth of 6%. Hershey plans to buy the other 20% of Golden Monkey. Hershey officials believe they will be able to leverage the core Golden Monkey products in the Chinese New Year period, given that 2016 is the Zodiac Year of the Monkey.
Third quarter net sales for Hershey's International and Other segment declined 15.2% to $226.9 million, due primarily to lower net sales of chocolate products in China. Unfavorable foreign currency exchange rates were a 7.9 point headwind and incremental sales from the SGM acquisition a 2.3 point benefit.
Company wide, unfavorable foreign currency exchange rates were a 2 point headwind. There is the effect of the devaluation of currencies against the U.S. dollar. If the Fed raises interest rates, the dollar will get even stronger, making it even tougher for companies like Hershey to grow international sales.
The company predicts full year sales to be about the same as 2014. The challenges that Hershey is experiencing clearly indicate just how tough it is to grow a mature business.
The company has strong cash flow with the help of adjusted gross margin of 46.0% in the third quarter of 2015, compared to 43.8% in the third quarter of 2014.
Hershey is like a bond, at $89.50 per share, the stock yields 2.6%. For a long time the stock yielded 2%. So 2.6% is above average yield for the stock's history. Hershey is like a solid-paying bond because its value doesn't change much while it pays quarterly dividends.
The next dividends are $0.583 on the common stock and $0.53 on the Class B common stock. The dividends are payable Dec. 15, 2015, to stockholders of record Nov. 25, 2015.
Conclusion
Hershey is solid financially, the company has plenty of cash and a reasonable debt level. I am not anticipating much growth in sales. I believe the stock will hover around $89 per share for a long time. If you are looking for high growth, Hershey is not for you. Sales gains are extremely challenging for this candy company. The strong dollar is hurting overseas. At a 21.68 forward P/E ratio, Hershey is fairly valued. This stock has trended upward to 30 P/E, but generally a P/E around 21 is typical. I bought another 22 shares of HSY at $89.40 per share. If the stock were to fall to 80, investors would be wise to pick up a few shares.
Disclosure: I am long HSY.
Friday, October 23, 2015
Thursday, October 15, 2015
Thursday, October 8, 2015
Wednesday, September 30, 2015
Friday, September 25, 2015
Thursday, September 24, 2015
Tuesday, September 22, 2015
Monday, August 31, 2015
Monday, March 23, 2015
Sunday, January 25, 2015
Friday, January 16, 2015
Tuesday, January 13, 2015
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