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Eclectic might be the word to describe the packaged food products owned by Minnesota-based Hormel Foods (NYSE:HRL). Spam, Skippy peanut butter and Muscle Milk nutritional supplements are just a few of the brands that have fueled HRL stock’s 34% gain over the past 12 months.
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Still, when it comes to food companies, it usually takes a comment from a large fund manager — Warren Buffett publicly stating that he has “…absolutely no intention of selling [Kraft Heinz (NASDAQ:KHC)]” — or from the FDA, or a lawsuit [Dan Loeb of Third Point sues Campbell Soup Company (NYSE:CPB)], to get them into the headlines.
So, it’s easy to overlook the food category. Some might even call it boring. There are no shiny widgets to unveil and no digital assets in the FAANG sense. Boring, though in this case, means steady and stable, which can be exceptionally good from an investment standpoint.
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HRL stock has benefited from being boring: 52 consecutive years of dividend increases. Earnings growth in 28 of the last 32 years. Recent reaffirmation of 2019 sales and earnings guidance amidst a sea of companies lowering guidance. These are all reasons to be excited about Hormel stock.
Hormel Basics (Beyond Spam)
Hormel is a global branded food company, with a portfolio that includes more than 30 products that consumers routinely find throughout the supermarket. In the refrigerated beverage aisle, there’s Muscle Milk. Stopping through the rapidly growing natural and organics section, you’ll find Applegate, Wholly Guacamole, and others. Looking through dried/canned goods, you’ll find their all-stars: Skippy, Justin’s nut butters, Hormel Chili and, of course, Spam.
What’s most impressive is that Hormel takes the number one or two spot in 35 grocery categories.
For those who feel that the world is shifting toward all things natural and fresh, HRL does have significant exposure to that category, but the perhaps-surprising fact is that their retail brands continue to post growth.
In terms of total dollar sales, the three-year CAGR for Gatherings Hard Salami is up 5% , Hormel Pepperoni is up 2%, Dinty Moore Beef Stew is up 3%, Spam is up 2%, and Black Label meat sales are up 5%. To be sure, these are not high-flying double-digit numbers, but the story and management’s execution is intact. Consistency in growth.
Expert Brand Builders
As experts in building global food brands, the next stage of Hormel’s growth as a broader food company is just beginning to unfold. They have acquired new brands like Columbus (craft meats) and Fontanini to enhance their offerings. The expansion of Hormel’s portfolio allows them to appeal to everyone from Gen X to Millennials to Baby Boomers.