Wednesday 19 December 2018 2:51 pm Schroders Talk

Celebrations Twix vs Mars... the lesson for investors

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Christmas, as my colleague Andy Williams crooningly reassures us, may well be the most wonderful time of the year but, in social terms, it is also potentially the most blunderful.

And while solutions to age-old concerns such as gifts people truly have always wanted and friction-free family get-togethers are still works-in-progress, our Value Perspective blog can shed some light on the most profitable way to approach the Celebrations tin.

The prospect of three friends squaring up at a recent party over the one remaining Maltesers Teaser nestled in a bed of unwanted Mars Bars and Milky Ways prompted thoughts of how a value investor might set about making their own choice from a tin of Celebrations. The first step is to identify some appropriate data.

While Celebrations-related statistics may be rather harder to track down than company reports and accounts, pockets do actually exist.

Amount of chocs per tin

This blog, for example, addresses the question of how many different types of chocolate make up an average tin of Celebrations – and concludes, albeit from a less than ideal sample size, that Mars and Bounty bars significantly outnumber Twixes and the two Galaxy representatives.

UK's favourite chocs

This YouGov blog, meanwhile, identifies the UK’s preferred Celebrations (in addition to Heroes, Roses and Quality Streets), which turn out to be the aforementioned Malteser Teasers and Galaxy duo – and very much not Milky Ways and Mars Bars.

So, having found our data – admittedly not perfect, though we are hoping your season of goodwill extends to investment blogs – we now need to define value in a chocolaty context.

Analysing the choc data

Well, value investors do need to be contrarian – that is, they need to like what the wider market prefers to avoid – but they also have to root out undervalued opportunities.

The potential upside here is that the wider market readjusts its view so that it chimes with the value investor’s own analysis of what a business is worth.

That upside, however, needs to be weighed up against the associated risk of ‘permanently impaired capital’. Or, to put it more bluntly, the chance you have picked a losing stock.

These risks can emerge in a number of ways – for example, the company’s balance sheet was not strong enough to see it through troubled times; the industry in which the company operates has seen a structural change that means the forecast upside will never be realised; or perhaps there is some environmental, social or governance (ESG) issue that brings it low.

In a similar vein (sort of), our value Celebrations consumer – to whom we are according the same tastes as the average Brit in that YouGov survey – needs to weigh up their potential risks of ending up with chocolates they do not particularly enjoy versus the potential upside of snaffling all their favourites.

That being so, then, how much is each chocolate ‘worth’?

The value of a Celebration

What our value Celebrations consumer is facing, really, is a trade-off between quantity and quality.

Using our somewhat suspect data – seasonal of goodwill, remember – we can split the tin into ‘winners’ and ‘losers’ in terms of average preferences and numbers.

As the following table shows, the winning batch are Bounty, Maltesers, Mars Bars, Milky Way and Snickers while the losers are the two Galaxy types and the Twixes.


Source: Schroders. For festively illustrative purposes only


As the average Brit’s preferred Celebration, then, the Malteser Teaser may appear the obvious chocolate to lunge for when a Celebrations tin comes your way.

On The Value Perspective blog, however, we would suggest the ‘value’ option should be the Mars Bar.

Yes, it is the most contrarian and risky choice but its potential upside – defined by us as the frequency it appears in the tin – does significantly increase its appeal.

Coming down from our chocolate high and back into the real world, we would freely concede this analysis is flawed in so many ways.

What we hope it has served to illustrate, however, is the basic truth that every investment is a trade-off between risk and reward – and identifying what each of these means to you when making your investment case is crucial to building a portfolio that should prove cause for celebration(s).

All stocks and chocs mentioned are for festively illustrative purposes only and not a recommendation to buy or sell.

  • Roberta Barr is an author on The Value Perspective, a blog about value investing. It is a long-term investing approach which focuses on exploiting swings in stock market sentiment, targeting companies which are valued at less than their true worth and waiting for a correction.




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