3 Chocolate Stocks for Halloween

Strong fundamentals, product innovation and bountiful demand from emerging markets could make these confectionary stocks a tasty investment opportunity

Vikram Barhat 29 October, 2020 | 10:10AM

Chocolate Bar with Hazlenuts

No other food item has survived the onslaught of the healthy eating trend quite as well as chocolate. The worldwide chocolate confectionery market was valued at $114.33 billion at the end of 2019 and is projected to reach $136.42 billion by 2027, growing 2.3% annually. A more optimistic projection indicates the global chocolate market is set to reach $171.6 billion by 2026, rising 5.3% annually.

It’s hard not to be tempted by the growth prospects of chocolate makers, once they bounce back from the pandemic-led sales decline. Long-term investors with a taste for the confectionary play may want to look at the following chocolate stocks.

With strong fundamentals, product innovation and bountiful demand from emerging markets, these companies are well positioned to corner the largest slice of the global chocolate market. Most of them are trading at or above our fair value estimates, so investors may want to wait for a meaningful pullback to create some margin of safety and an attractive entry point.

The Hershey Co
  Ticker HSY
  Current yield: 2.14%
  Forward P/E: 23.87
  Price $150.42
  Fair value: $131
  Value 15% Premium
  Moat Wide
  Moat Trend Stable
  Star rating **
Data as of Oct 16, 2020


US confectionery behemoth Hershey (HSY) controls around 45% of the nearly $25 billion domestic chocolate market. The firm owns more than 80 brands, including popular names such as Reese's, Kit Kat, and Kisses. Although Hershey's products are sold in about 85 countries (including Brazil, China, India, and Mexico), just 10% of its total sales comes from outside the US.

Under the leadership of chief executive Michele Buck, the company has been ramping up investments in its core domestic brands while pulling back international spend, says a Morningstar equity report. Hershey has seen some sales decline in recent months as consumers have taken fewer trips to convenience stores (source of a quarter of its sale) and heeded social distancing mandates.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Mondelez International Inc Class A57.46 USD-0.05
Nestle SA ADR112.71 USD0.63
The Hershey Co148.05 USD-0.07

About Author

Vikram Barhat  is a Toronto-based financial writer specialising in investing, stock markets, personal finance and other areas of the financial services industry. 

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