Demonstrated Growth during Multiple Economic Cycles (HSY, KO)

In his Deep Fundamental Analysis model, manager Tab Buford reviews quarterly and annual reports and looks for companies that have a demonstrated ability to grow sales, book values, earnings and cash flows over many different economic cycles.

One of the top holdings in the model is The Hershey Company (NYSE: HSY), a company that has grown its sales from $4.9 billion in 2007 to $5.1 billion in 2008, then to $5.3 billion in 2009. In 2010 the company had already reported $4.1 billion in sales by the third quarter. The company’s net income has also grown consistently since 2007, rising from $214.2 million in 2007 to $311.4 million in 2008 to $436 million in 2009. HSY’s shareholder equity dropped from $683.4 million in 2006 to $592.9 million in 2007, then dropped further to $318.2 million in 2008. In 2009, it increased to $720.5 million. Outstanding shares also increased from 227 million in 2007 and 2008 to 228 million in 2009.

Another top holding in the model is Coca-Cola Co (NYSE: KO). Like HSY, KO is a product that remains popular regardless of the economic cycle. But unlike HSY, KO has not had consistent growth in sales. In 2007 the company had $28.9 billion in sales which then increased to $31.9 billion in 2008 but then dropped to $31 billion in 2009. By the third quarter of 2010, KO had announced $24.6 billion in sales. The company’s net income dropped from $6 billion in 2007 to $5.8 billion in 2008, but then rose to $6.8 billion in 2009. Total shareholder equity dropped from $21.7 billion in 2007 to $20.5 billion in 2008 then rose to $24.8 billion in 2009. KO’s total number of outstanding shares (2.3 billion) has remained the same since 2006.