Having trouble finding a way to make money in the S&P 500 this year? Just ask a 113-year-old orphanage how it's done.
The Milton Hershey School Trust, the No. 1 holder of more than $13 billion dollars worth of Hershey stock, is up $1.8 billion just this year on the stock. says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That's because shares of the chocolate maker gained more than 16% this year, while the S&P 500 is down nearly 17%.
It's been a boon for the trust set up by Hershey founder Milton Hershey in 1909. He granted most of his fortune to the school for orphans. And even today, the trust still owns 28% of the company's stock. That's more than even the ETF giants like Vanguard and BlackRock.
And this year the orphanage's holdings teach lessons to all investors.
What Hershey Teaches About The S&P 500
Hershey, a normally sleepy S&P 500 consumer staples stock, ranks among the top 75 in the S&P 500 this year. Why?
It checks all the boxes for what investors crave now. Market-beating dividend yield? Yes, 1.9% for Hershey versus 1.6% for the S&P 500. Pricing power to fight inflation? Check, revenue is on pace to jump 15% this year due, in part, to price hikes.
All told, Hershey is seen running circles around many of the must-own big-caps. The $45 billion in market value candy maker is expected to grow faster than Apple, Microsoft and Alphabet this year and make more profit than Amazon.
"(Hershey) recently announced several rounds of pricing actions, which we believe will drive sales growth in 2022/2023 as the company has historically demonstrated strong pricing power," said CFRA analyst Arun Sundaram in a report.
Hershey Shows S&P 500 Rotation
It's been a big rotation year for the S&P 500. And Hershey is just one of the more interesting examples.
Investors' infatuation with big-cap technology stocks evaporated in January. And in its place is a push into stable, dividend-paying stocks. While the S&P 500 collapsed into a bear market, the SPDR S&P Dividend ETF is down less than 1%. Adding back the 2.6% dividend yield, and investors are actually up this year. The tech-heavy Invesco QQQ Trust, which owns the 100 most valuable non-financials on the Nasdaq is down nearly 30% — wiping out life-changing amounts of money.
But consumer staples stocks, like Hershey, are the No. 2 top-performing sector among the 11 in the S&P 500. The Consumer Staples Select Sector SPDR is down just 3.7%, behind only to the Energy Select Sector SPDR ETF this year.
More than half the 33 consumer staples stocks in the S&P 500 are up this year, versus just a quarter that are in the S&P 500. And Hershey is just one example of consumer staples' outperformance. Potato processor Lamb Weston, cereal maker General Mills and Campbell Soup are up 41%, 32% and 21%, respectively this year.
What's Next For Hershey?
The question now is what's next for consumer staples like Hershey? The company has wisely diversified into new types of foods like Skinny Pop bagged popcorn and protein bars, in addition to its iconic candy.
But analysts seem to think most of the stock's big pop is behind it. Analysts think Hershey shares will trade for 237.39 in 12 months. If they're right that's only 5% potential upside. Sundaram, who rates the stock a sell, thinks pricing pressures will finally melt Hershey next year, too.
In the meantime, though, the Hershey rally is welcome news for its largest shareholder.
Hershey's Top Investors
| Investor | % of company owned | Gain this year ($ millions) |
|---|---|---|
| Milton Hershey School Trust | 28.4% | $1,846 |
| BlackRock | 7.4 | $479 |
| Vanguard Group | 7.1 | $461 |
| State Street Global Advisors | 3.5 | $228 |
| Geode Capital Management | 1.5 | $100 |
| Renaissance Technologies | 1.5 | $95 |
| J.P. Morgan Asset Management | 0.9 | $58 |
| Northern Trust Global Investments | 0.9 | $56 |
| American Century Investment Management | 0.7 | $48 |
| Eaton Vance Management | 0.7 | $46 |
| Bank of America | 0.7 | $45 |
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter @mattkrantz
