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If we have learned anything from the stock market in 2009, it's that the pendulum swings both ways. After a month-long selloff, investors embraced stocks last week and sent the S&P 500 up about 7%. But rest assured, the waves of panic will return. Unemployment is still on the rise and some bellwethers will post disappointing earnings. Here is a defensive mid-cap company to consider when bearishness resumes.

Hormel ( HRL) makes and markets food products around the world. The company specializes in meats and offers them in every form: fresh, frozen, cured, smoked, cooked or canned. Founded in 1891 in Austin, Minn., Hormel has grown into a national purveyor of classic American products like Dinty Moore stew and everyone's favorite, Spam.

The company posted impressive fiscal second-quarter results. Although revenue was flat, net income increased 4% to $80 million and earnings per share improved 5% to 59 cents. The operating margin remained stable at 8% and the net margin stood at 5%.

Hormel has bolstered its cash position, adding more than $200 million of reserves since the recession hit. Yet a quick ratio of 0.9 indicates a less-than-ideal liquidity position. Our model prefers companies with quick ratios higher than 1. The debt burden has increased 20% over the past year and is now at $450 million. But Hormel's debt-to-equity ratio is still modest at 0.2. We give the company an overall financial strength score of 8.9 out of 10, higher than our "buy"-rated average.

Despite being laden with Spam, Hormel achieved a brisk run in 2009, climbing 13% and outperforming the Dow Jones Industrial Average and S&P 500. However, investors' enthusiasm has pushed the shares into premium territory. Hormel is trading at a price-to-earnings ratio of 17 and a price-to-book value ratio of 2.2, making it about 10% more expensive than its average packaged-foods rival.

Still, Hormel is cheaper than some of its larger peers like Kraft ( KFT), which is trading at a price-to-earnings ratio of 21, and PepsiCo ( PEP), with a P/E of 18.

Nevertheless, we rate Hormel a "buy" and expect solid outperformance into 2010. Consumer retrenchment will continue even when the economy starts to grow again. There's evidence that American thrift is back with a vengeance. The personal savings rate reached a 15-year high of 6.9% in May, and it's likely to continue to climb as unemployment peaks and Americans attempt to deleverage. Hormel's lineup of discount meats and microwaveable dinners will be hot-sellers for the rest of 2009.

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