Many individual stocks are still recovering from the 2022 bear market. Not every company has benefitted from the recent rally, which was initially fueled on the AI boom. But now with the market broadening beyond tech stocks, some companies left behind have room to run.
That includes food and snack companies. These firms were out of favor with markets last year as interest rates peaked, and as new weight loss drugs came onto the market.
There’s one last trend weighing on some of these companies. Cocoa prices have soared this year, bringing chocolate prices surging higher as well.
However, the price move higher has gone parabolic, a sign that we may be near the end of the price rally. Once the parabolic move peaks, prices are apt to reverse quickly.
That could be a boon for cocoa-heavy companies like Hershey (HSY). The candy and confectionery producer does hedge its cocoa needs, so it hasn’t been hit as hard as headline cocoa prices might suggest.
Hershey has lost 25% of its share price over the past year. And high cocoa prices caused earnings to drop 12%. But a reversal in that trend could be huge and allow shares to recover, likely before the company reports in its earnings report that it has done so.
Action to take: Investors may like shares at current prices for the long term. At current prices, Hershey pays a 2.8% dividend.
For traders, shares are now moving in an uptrend. The August $210 calls, last trading for about $8.05, could see mid-double-digit returns.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.