FT.com
Investment in Chocolate – what finer?
The Hershey’s Trust would be mad to sell Hersheys!
Below is a link to my letter on the FT website. The text & the original are also reproduced below.
LETTERS TO THE EDITOR: Investment in chocolate – what finer?
Letter to the Editor of the Financial Times
Dear Sir,
I could not disagree more strongly with your Leader on Hershey. I cannot think of a better example of what Peter Lynch would call “Diworsification” than the Hershey’s Trust desire to sell its stake in Hershey’s.
The branded chocolate business is one of the best businesses one can ever be invested in. Especially when it has the scale and depth of penetration (both in terms of distribution and consumer share of mind) that Hershey’s commands. Just ask any member of the Mars Family. Or ask Warren Buffett (of Berkshire Hathaway) a significant part of whose net worth was build through the profits of See’s Candy.
Why would anybody in their right mind want to trade a significant share of Hershey’s with its excellent characteristics for an insignificant share of a hotchpotch of American business, probably chosen by some advisor who is better at getting selected than delivering investment performance?
To illustrate this point, examine the return on Hershey’s stock versus the S&P 500 over the last 10 years. Over that period, Hershey’s returned 15.7% annualized, for a total return of 330%. The S&P, by contrast, returned 10.3%, for a total return of 165%. Do the Hershey’s trust directors really think that they can do better for their beneficiaries? I urge them to think again, and to consider their motives.
Sincerely,
Guy Spier
Aquamarine Fund
40 West 55th St, 5A
New York, NY
