zman’s Energy Brain

oil, gas, stocks, etc…

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Monday Morning Addendum – Hershey’s Call

Posted by zmann on October 16, 2006

Oil is not the only commodity in my world. I have other interests including something of a  sweet tooth. The only chart that I know of that’s uglier than the oil and gas charts is sugar.

Talk about ugly. Sugar had been trending up with ethanol prices, which had been moving with oil. Now that oil and ethanol have fallen, sugar is correcting hard and I wouldn’t expect ethanol or sugar to move up until next spring when gasoline demand picks up.

That sugar chart is ugly unless of course your #1 cost just happens to be sugar, like at HSY. Even better if your stock hasn’t done much lately…;range=1y;charttype=line;crosshair=on;logscale=on;source=

… and people don’t expect much more than 3-4% growth out of you annually, and you’ve missed by a few percent for 3 of the last 4 quarters before hitting the estimate spot on for the last one.

HSY has results out Thursday, October 19. Expectations are for earnings of $0.81 and that hasn’t changed more than a penny in the last 90 days even though the company is tracked by 17 candy analysts. I bet these guys get slapped a lot “Hi, I’m a candy analyst, what’s your name”. Anyway, trading at $53.25, I’m thinking about bidding on the Nov 55 calls at a nickel below bid ($0.45) this week to see if I can pick it off. The Nov 50s can also be had for very little premium. The Oct 55s at $0.20 are more than a little risky for this kid, but I may go for them as well bidding $0.10 in a go for broke (probably broke) fasion.

I think the pair trade here (puts) is Imperial Sugar (IPSU) although I haven’t really started working it up yet so we’ll see.


One Response to “Monday Morning Addendum – Hershey’s Call”

  1. Lars said

    Don’t know if this cocoa farmers strike will affect HSY, but its something to watch.

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