How An Orphanage Made $1.8 Billion In One Year From Chocolate Stock

The Milton Hershey School, founded in 1909 by the famous chocolate tycoon Milton Hershey and his wife, Catherine Hershey, has a heartwarming origin story as an orphanage. Over the years, the school has broadened its horizons to include K-12 students from all backgrounds, including girls, racial minorities and families struggling with poverty.

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But what takes the chocolate cake is the school’s massive financial success. The Milton Hershey School raked in a sweet $1.8 billion last year.

What’s the secret to the school's success? According to Investor’s Business Daily, the Milton Hershey School Trust, the school’s funding source, is the biggest holder of Hershey stock worth over $13 billion. Hershey’s shares increased by more than 16% in 2022 while the S&P 500 went down nearly 17%, The Hershey Co. is at an all-time high.

The trust continues to benefit immensely from Hershey’s success as it still owns 28% of the company’s stock, more than even exchange-traded fund (ETF) giants like Vanguard and BlackRock Inc. (BLK).

The iconic chocolate company’s shares have returned more than 18% in 2023, exceeding the market’s performance by two times.

Hershey's first-quarter 2023 report showed that the company’s net sales grew by 12% year over year (YoY) to $2.99 billion, exceeding Wall Street’s expectations. The company’s reported revenue and core revenue growth were almost identical, indicating no recent acquisitions, while foreign exchange currency only reduced reported revenue growth by 0.1%. Core growth was a result of 8.9% higher product prices and 3.3% higher volume/product mix.

Adjusted operating profit also increased by 17%, driven by product price increases and volume gains, despite inflation-driven higher costs for raw material, packaging and logistics. The adjusted earnings per share (EPS) surged by 17%, surpassing Wall Street’s expectations, with cash from operations up 15% YoY.

Hershey’s first-quarter report was a continuation of its sales and earnings growth in recent years. With annual sales and adjusted EPS guidance raised by one percentage point, Hershey is capable of solid growth in both good and tough economic climates.

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Even during a recession, companies that offer affordable treats often perform better than expected. 

Back in 2001, Leonard Lauder, the then-chairman of Estée Lauder, observed a consumer trend he referred to as “the lipstick effect.” The idea was that during tough economic times, consumers tend to cut back on their spending in most areas, but they still indulge in small luxuries they can afford, like a tube of lipstick or a bar of chocolate. 

Importance of Long-Term Investing

While many of us aren't going to hold stock in a company for over a century, many companies have made just as much holding for a fraction of the time. For example, one investor in Berkshire Hathaway Inc. became a billionaire by holding the stock for roughly half that time. Simply holding Tesla Inc. stock for several of the past years would have netted most a nearly 1000% gain.

But investors today have resources many investors during these times didn't. Thanks to changes in federal law, anyone can invest in startups on platforms like StartEngine and Wefunder. This includes the ability to invest in StartEngine itself for a limited time. There's dozens of companies on these sites which allows investors to invest pre-IPO and see substantial gains on the IPO alone, not just holding while the stock is public.

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