With markets taking it on the chin, Joe Duarte has a sweet alternative that could climb the wall of worry.
These are worrisome times. Growth appears to be slowing, the markets are correcting, and the Coronavirus could massively disrupt global trade, not to mention its human toll.
But who doesn’t like chocolate, especially during difficult periods? Indeed, amidst the rising doom and gloom of the Coronavirus situation, there are still some stocks with attractive chart patterns and equally interesting stories to back up the bullish charts. One of them is the Hershey Company (HSY), a leader in chocolate snacks, and home to highly familiar and delicious brands such Hershey’s Kisses, Kit Kat, Almond Joy and Reese’s Peanut Butter cups (see chart).
Certainly, you won’t find Amazon.com (AMZN) growth rates in revenues and earnings, or a sexy TSLA (TSLA) like cult like following here. On the other hand, the odds of a 10% to 15% intraday price swing are also highly unlikely and welcome in a volatile market. Instead what is most likely with HSY is steady performance through what could be a difficult period for the financial markets in the next few weeks.
Furthermore, unlike some high flying market darling tech stocks, HSY recently delivered better than expected organic sales growth, rising gross margins, and is expecting higher revenue growth in 2020 than consensus estimates while giving measured, and likely achievable guidance. The potential for steady growth is not due to soft demand for their products but is more related to the deployment of an aggressive Capital Expenditure plan in order to improve and expand its supply chain to allow faster response to customer demand for its products.
In other words, unlike many companies these days who buy back their stock as part of their business plan in order to inflate flagging earnings; HSY is actually investing in its business in order to grow it in the future and to outperform their competition. In addition, with Treasury yields below 2% on a regular basis, you can get further comfort from the 1.93% dividend yield.
Technically, the stock is close to clearing long-term resistance at $160 with the potential to move to the $200 area if it is successful. Of course, some of what happens to HSY is market dependent. Nevertheless, at this point barring something very negative, HSY looks like a pretty good way to play the long side of the market in what could be a bumpy ride.
Joe Duarte is author of Trading Options for Dummies, and The Everything Guide to Investing in your 20s & 30s at Amazon. To receive Joe’s exclusive stock, option, and ETF recommendations, in your mailbox every week visit here. I’ll have more for subscribers in this week’s Portfolio Summary. For a 30-day Free trial subscription go here.
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