It's Time to Play Ketchup

Heinz(HNZ Quote), the world's largest maker of ketchup, is one of a few companies largely immune to a global economic slowdown. The company is benefiting from lower commodity prices and the ability to raise its own prices, protecting profit margins at a time when other companies' earnings are collapsing. TSC Ratings gives the stock "A" and "Buy" ratings.

Heinz had average gross, operating and net margins of 36%, 15% and 8%, respectively, over the past 10 years, despite accelerating inflation, led by gasoline prices. The company's products are relatively price inelastic as they represent a low share of a consumer's income. Add to that well-known brand names, and the result is pricing power that produces consistent earnings.

Heinz has a high and stable ROE, averaging 44% over a decade. The ROE figure is exaggerated by the company's capital structure, which is reliant on debt. However, the load is not excessive and remains within outer bands, with 60% of total assets of $10.5 billion being funded by debt and other liabilities. This is high but not unmanageable. ...