Hershey: A Sweet, Low-Risk Stock

6/17 - "Hershey shares jumped up not too long ago when M&M Mars Candy Company agreed to a buyout. Shares were down big today after a Hershey's Board member seemed to indicate they were not looking to sell at this time...With the drop back to < $36 most of the risk seems to be out of these high-quality shares."

"Earnings will likely be down to about $1.82 this year from $2.08 in 2007. A rebound to about $1.94 is expected for 2009. Thus, Hershey shares now trade for 19.7x and 18.5x this year's and next year's projections. That compares with a 10-year median P/E of 23x and an almost identical 5-year average multiple of 22.8x."

"Hershey shares look to be good value with or without a buyout based on historical valuations. Even a lower than average 22 multiple on 2008 estimates would bring these shares back to $40.04 by year-end. Add in the two remaining quarterly dividends and the 6-month total return could be over 13%.

For me, though, I see a better play by using options sales along with the purchase of HSY shares."