Hershey Buyout Attempt By Mondelez May Have Just Triggered The Short Of The Year

Discussion in 'Trade Journals' started by Verified Investing, Jul 1, 2016.

  1. Verified Investing

    Verified Investing New Member

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    Hershey Co (NYSE:HSY) received a $23 billion buyout offer from Mondelez International Inc (NASDAQ:MDLZ). HSY rejected the offer but the stock still jumped almost 17% on the news. Hershey closed at $113.49, +16.35 (+16.83%). While most analysts and investors are focussed on the news itself, the repercussions were far reaching with stocks like Campbell Soup Company (NYSE:CPB) jumping 6% and Kellogg Company (NYSE:K) jumping over 5% in sympathy. The definition of a sympathy stock play is where investors draw a straight line assumption, that if one old school food maker got a buyout offer for a premium to their current stock price, then all old school food makers may get bought out for a premium.

    The issue with this logic is that it is false after the initial stock pop. History has shown us thousands of times over that these pops in sympathy do not last. Smart investors know that these moves higher actually offer a shorting opportunity. Smart investors are looking to buy puts or short the stocks of CPB, K and any other stocks that received a sympathy pop due to the Hershey buyout attempt. Cambell Soup Company closed at $66.53 and Kellogg Company closed at $81.65. Both stocks will sell off over the next month and give back their recent gains.
     

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