Truly Hot Stocks: Spice Up Your Portfolio With Some Condiment Stocks

James Dennin, Kapitall: Hot sauce is a fast growing industry. We decided to take a closer look at some seemingly hot stocks. 

Whether or not you like your eggs with a kick – it might surprise you to hear that hot sauce was one of the fastest growing industries last year. In fact, it was only  slightly edged out by social networking in its market expansion through 2012, according to IBIS World, an Australian marketing and research firm.

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It seems that a confluence of factors – from immigration to demographic changes – has changed the American palate. Over the years, Americans have craved more flavor in their foods, and spice is a much healthier flavor enhancer than salt, preservatives, or fat.

And there are strong numbers to support this. Over the last decade, the hot sauce industry has grown over 9% each year, with little to no signs of slowing down.

There have been major plays in the market as well, supporting the idea that sauces and condiments are earning more attention from investors. Last year, Warren Buffett's Berkshire Hathaway (BRK/A) acquired the legendary condiment maker Heinz.

And then there's the incredibly trendy, yet strange and mercurial company behind the hot sauce Sriracha – whose steady rise despite not spending a dime on advertising (or really anything, besides chili peppers) is a powerful testament to hot sauce's resilience and popularity.

The company, Huy Fong Foods, is possibly one of the worst run businesses you've never heard of.

Since opening its doors in 1980 (with the expressed goal of bringing traditional Vietnamese hot sauce to the country's diaspora – nothing more), the company has not once raised the cost of its product. You heard me. Through four presidencies and a three-fold increase in food prices, Sriracha's price has held constant. And yet the company's profits have risen steadily each year. 

Since Huy Fong is not looking for a buyer, and would never want to deal with the hassle of an IPO – it's unlikely the special sauce will be a publicly traded investing opportunity any time soon.

But it wasn't hard for us to develop a condiment index. We managed to find six truly hot stocks – companies that bring in a sizable portion of their revenue through sauces, dips, and spices. They trade on public exchanges, and all return a healthy dividend. Just in case you're hungry for some spicy shares. 

Click on the interactive chart below to see analyst ratings over time. 

Do you see investment opportunities in hot sauce? Use the 'condiment index' below as a starting point for your own analysis. 

1. Kraft Foods Group, Inc. ( KRFT): Operates as a consumer packaged food and beverage company in North America. Market cap at $33.14B, most recent closing price at $55.79.

Brands include: Bullseye BBQ Sauce, Velveeta 
 

 

2. B&G Foods Inc. ( BGS): Engages in the manufacture, sale, and distribution of shelf-stable foods in the United States, Canada, and Puerto Rico. Market cap at $1.78B, most recent closing price at $33.94.

Brands Include: Red Devil Hot Sauce
 

 

3. Hormel Foods Corp. ( HRL): Produces and markets various meat and food products in the United States and Internationally. Market cap at $11.59B, most recent closing price at $44.11.

Brands Include: Spam, Skippy Peanut Butter
 

 

4. Lancaster Colony Corporation ( LANC): Engages in the manufacture and marketing of consumer products focusing primarily on specialty foods for the retail and foodservice markets in the United States. Market cap at $2.34B, most recent closing price at $87.07.

Brands Include: Marzetti Salad Dressings
 

 

5. The J. M. Smucker Company ( SJM): Engages in the manufacture and marketing of branded food products in the United States and internationally. Market cap at $11.76B, most recent closing price at $112.90.

Brands Include: Smucker's Jams and Jellies 
 

 

6. McCormick & Co. Inc. ( MKC): Engages in the manufacture, marketing, and distribution of flavor products and other specialty food products to the food industry worldwide. Market cap at $9.20B, most recent closing price at $69.97.

Brands Include: A full line of spices, gravies, and other sauces under the McCormick Brand name. 

 

 

( List compiled by James Dennin, a Kapitall Writer. Dividend yields sourced from Zacks Investment Research, all other data sourced from Yahoo! Finance.)

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