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Yamil Berard
Yamil Berard
Articles (132) 

After the Panic on Wall Street, Try Some Chocolate

Gurus have a strong taste for Mondelez International, an Illinois-based confectionery

February 06, 2018 | About:

In times of market panic, there’s always chocolate.

The cocoa-based substance packs enough serotonin to create feelings of extreme happiness and well being.

Just in time for Valentine’s Day, investors may want to consider a few of the decadent choices of gurus with a sweet tooth.

Illinois-based Mondelez International (NASDAQ:MDLZ) has become a favorite of gurus like Ken Fisher (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Bill Ackman (Trades, Portfolio) and George Soros (Trades, Portfolio).

The multinational confectionery and food and beverage conglomerate split from Kraft Food’s North American grocery business in 2012. One-third of its business is dedicated to chocolate morsels like Cadbury and the Milka Oreo chocolate bar, which is layers of milk chocolate squeezed between cookie crumbles and vanilla cream. (The company also sells Trident gum, Ritz biscuits, LU, Belvita, Triscuit and Tang.)

Since Fisher has owned it, it has gained an estimated 21%.

As of Dec. 31, Gabelli owned more than 3 million shares of the stock. He started buying it in 2013 at under $28 a share. He’s been mostly adding shares for a total estimated gain of 51%.

In Tuesday trading, the stock was at $43.49 a share, down by 1%. By market close, it reversed, up 1% to just under $45 a share.

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Another big fan of the stock is Ackman. In November, he said the stock was substantially undervalued “given its high business quality, long-term secular growth potential – especially in emerging markets – and substantial opportunity to improve profit margins. … it is trading at 17 times our estimate for 2018 earnings per share, a discount to the S&P 500 market multiple, for a business whose attributes are substantially better than the average company in the S&P 500.”

GuruFocus rates the company, which has a $65 billion market cap, 5 out of 10 in financial strength and in profitability and growth.

Other U.S. players

The maker of Kisses chocolate and Reese’s peanut butter cups, chocolate giant Hershey Co. (NYSE:HSY) controls more than 45% of domestic chocolate consumption.

The Pennsylvania-based company’s stock has dropped by 6% over the last year as it faces competition from craft chocolatiers and upstart competitors.

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Hershey's net sales growth rose 1% last year but declined 1.6% in the last quarter of 2017. The company is targeting growth of 5% to 7% in 2018 with more likely than not, new brands to tantalize the taste buds.

Last year, the company’s “Cookie Layer Crunch Bar” and “Hershey's and Reese's Popped Snack Mix and Dipped Pretzels” were big sellers.

A number of gurus have scaled back their holdings of Hershey stock in 2017.

First Eagle Investment (Trades, Portfolio) and the T Rowe Price Equity Income Fund (Trades, Portfolio) sold out on holdings of the company as of Dec. 31. At one point, 8% of their portfolios were filled with Hershey stock. Others who have reduced their positions include Joel Greenblatt (Trades, Portfolio) and  Gabelli.

Hershey shares were up over 1% in afternoon trading at more than $101 a share. The company has a market cap of $21 billion. GuruFocus shows it has a financial strength rating of 5 of 10 and a profitability and growth rating of 8 of 10.

Rocky Mountain Chocolate

The Rocky Mountain Chocolate Factory (NASDAQ:RMCF) was also in the green on Tuesday. Shares were up 0.16% to $12.23. The stock price has been up 13% in the last year.

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It sells premium assorted chocolate, sugar-free products, baskets, dark chocolate, truffles, toffee and caramels. Many are marketed on Amazon.

The company is rated an 8 of 10 in financial strength and a 7 out of 10 in profitability and growth. It has a market cap of $72 million.


Rating: 5.0/5 (1 vote)

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