S&P 500: How an orphanage made $1.8 billion on one stock this year

Having trouble finding a way to make money in the S&P 500 this year? Just ask a 113-year-old orphanage how to do it.




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The Milton Hershey School Trust, the No. 1 holder of more than $13 billion dollars worth Hershey (HSY) stock, is up $1.8 billion on the stock this year. says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That’s because shares of the chocolatier are up more than 16% this year, while the S&P 500 is down nearly 17%.

It has been a blessing to the trust established in 1909 by Hershey founder Milton Hershey. He donated 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 Black rock (BLK).

And this year, the orphanage holdings are teaching lessons to all investors.

What Hershey is learning about the S&P 500

Hershey, a normally sleepy S&P 500 consumer staples stock, is among the top 75 on the S&P 500 this year. Why?

It ticks all the boxes for what investors now desire. Market conform dividend yield? Yes, 1.9% for Hershey versus 1.6% for the S&P 500. Pricing power to fight inflation? Look, sales are on track to be up 15% this year, partly due to price increases.

All told, Hershey is seen running circles around many of the must-own big-caps. The candy maker with a market value of $45 billion is expected to grow faster than Apple (AAPL), Microsoft (MSFT) and Alphabet (GOOGL) this year and make more profit than Amazon (AMZN).

“(Hershey) recently announced several rounds of price action, which we believe will drive revenue growth in 2022/2023 as the company has historically demonstrated strong pricing power,” CFRA analyst Arun Sundaram said in a report.

Hershey shows S&P 500 rotation

It’s been a big rotational year for the S&P 500. And Hershey is just one of the more interesting examples.

Investors’ infatuation with big-cap technology stocks faded in January. And in its place comes a push toward stable, dividend-paying stocks. While the S&P 500 collapsed into a bear market, the SPDR S&P Dividend ETF (SDY) fell less than 1%. Add to that the 2.6% dividend yield and investors are even higher this year. The technology-intensive Invesco QQQ Trust (QQQ), which owns the 100 most valuable non-financial institutions on the Nasdaq, is down nearly 30%, wiping out life-changing amounts of cash.

But consumer staples stocks like Hershey are the second best performing sector of the 11 in the S&P 500. The Consumer Staples Select Sector SPDR (XLP) is down just 3.7%, trailing only the Energy Select Sector SPDR ETF (XLE) this year.

More than half of the 33 consumer staples stocks in the S&P 500 are up this year, compared to just a quarter in the S&P 500. And Hershey is just one example of consumer staples outperforming. Potato processor Lamb Weston (LW), grain maker General Mills (GIS) and Campbell Soup (CPB) have increased by 41%, 32% and 21% respectively this year.

What’s next for Hershey?

The question now is what’s next for consumer goods like Hershey? The company has wisely diversified into new food types, such as popcorn in Skinny Pop pouches 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 12 months from now. If they’re right, that’s only a 5% potential advantage. Sundaram, who rates the stock as a sell, thinks the price pressure will finally melt Hershey next year.

In the meantime, however, Hershey’s rally is welcome news for its largest shareholder.

Hershey’s best investors

investor % ownership of the company Profit this year ($ millions)
Milton Hershey School Trust 28.4% $1,846
Black rock 7.4 $479
Vanguard Group 7.1 $461
State Street Global Advisers 3.5 $228
Geode Capital Management 1.5 $100
Renaissance Technologies 1.5 $95
JP 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

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