The price of cocoa has been on a sharp rise over the past 12 months, causing concern among investors and chocolate lovers alike. This sudden increase in the price of cocoa is attributed to disruptions in key cocoa-producing nations like the Ivory Coast and Ghana, where disease has affected planting patterns and productivity. This has led to a more than 150% increase in cocoa prices in under six months, making chocolate production more expensive.
Despite the challenges posed by the rising cocoa prices, there are some companies in the chocolate industry that may benefit from a reversal of this trend. Three top chocolate stocks have been identified as potential beneficiaries if cocoa prices stabilize or decrease. These companies have proven themselves to be well-run businesses that can navigate through rough periods, including fluctuations in the price of key commodities like cocoa.
The methodology used to select these top chocolate stocks focused on the price-to-sales ratio as a key fundamental valuation statistic. This ratio was lower for all three companies compared to over two years ago, indicating potential value for investors. These companies specialize in chocolate products rather than offering a wide range of consumer goods, making them attractive options for those looking to invest in the chocolate industry.
The three best chocolate stocks identified for potential cocoa exposure include Hershey Company, Nestle SA, and Lindt & Sprungli. Hershey Company, known for its iconic American chocolate bars, has shown growth in net sales and net income in recent years, maintaining a significant share of the U.S. chocolate market. Nestle SA, the world’s biggest food and beverage company, offers a diverse range of brands and products, with strong growth potential in organic sales and earnings. Lindt & Sprungli, a premium Swiss-based chocolate company, has expanded its presence in the U.S. market and demonstrated organic sales growth despite high cocoa prices.
Overall, despite the challenges posed by the rising cocoa prices, the chocolate industry remains resilient. Companies like Hershey, Nestle, and Lindt & Sprungli have shown their ability to adapt and thrive in challenging environments. With potential for cocoa prices to stabilize or decrease in the future, these companies may see a rebound in their fortunes. Investors looking to capitalize on this trend may find these top chocolate stocks to be solid investment choices in 2024.
