Are You Depressed?

Good news.  A group of researchers from University College London have discovered what may be the cure for clinical depression: Chocolate.  The study, published in Depression and Anxiety, is the first to examine the association with depression according to the type of chocolate consumed.

The study found that individuals who reported eating dark chocolate in two 24-hour periods had 70 percent lower odds of reporting clinically relevant depressive symptoms than those who reported not eating chocolate at all.

Considering depression affects more than 300 million people worldwide, according to the World Health Organization, and is the leading global cause of disability, I decided to take this opportunity to see how you can profit from the recent news about the health benefits of cacao.

The king of chocolate is Hershey (NYSE: HSY).  The Derry Township, Pennsylvania-based company has been on a tear lately, reporting blowout earnings of $1.48 for its most recent quarter compared to Wall Street expectations of $1.18 per share.  The chocolate bar maker also posted revenue of $1.77 billion for the quarter versus a forecast of $1.76 billion.

All the sweet news has been extremely beneficial for Hershey stock.  Year-to-date, HSY has increased 37 percent while the S&P 500 has appreciated 20 percent.  For the preceding 12-month period, Hershey has seen its stock grow by 59 percent.

I’m a big fan of Hershey and have been for years, as confessed in a column I penned for CNBC during Halloween, 2013.  In it, I recommend a position in the stock for those seeking a sugar rush for their portfolio.  And had you taken my advice, you would be sitting on a king size profit of 84.7 percent, which is annualized at 14.11 percent.  In addition, Hershey’s dividend has increased several times, roughly 50 percent for the same time period.

To compare, the S&P 500 has returned a profit of 60 percent since October 31, 2013.

These kinds of numbers, though, are not indicative of future results.  However, as wonderful as Hershey is as a ‘core’ investment for the long-term, it also poses a terrific seasonal trading opportunity for investors to take advantage of.

It’s no secret, chocolate is synonymous with Halloween.  As I reported in 2013, Americans were consuming roughly 100 pounds of the confection every second and the trend hasn’t slowed down.  According to CNBC’s Janine Satioquia-Tan, including fresh data from Euromonitor, those in the Homeland will spend $18.27 billion worth on chocolate alone in 2019.

From a macro point, sales figures this promising always support a bullish thesis.

Since my CNBC article was published in 2013, Hershey’s stock has popped 4.52 percent, on average, between September 1st and October 31st.  If you take this same return and annualize it, you would be staring at a profit of 27.12 percent, as determined by Wellington & Co. Hedge Fund Research.

Now that can buy a lot of Jolly Ranchers!

One more piece of good news: Hershey plans on hiking prices for its chocolate bars by 9 percent this Halloween, according to Goldman Sachs analyst, Jason English.  The price increase, though, is not enough to cancel the night for Trick-or-Treaters.

As Barron’s Al Root stated in the July 18th issue, “Candy prices are relatively ‘inelastic,’ which is a fancy way of saying a chocolate bar that cost a nickel more than it did yesterday still gets eaten.”

And there is nothing depressing about that!  Let us know if you plan on taking a bite out of the Hershey Halloween trade.

 

By: Todd M. Schoenberger of Wellington & Co. Hedge Fund Research and Author of No Lie Lives Forever

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