Hot Stock Tip: B&G Foods [NYSE:BGS] is a good value right now. Pays a decent dividend and the company has a business model of gobbling up trusted but neglected brand staple food items. Specifically, they repackage these items to be able to priced for the shelves of Dollar Stores... which I see more and more being built. I don’t see a majority of the middle class dining on Porterhouse Steaks and Lobster Tails every week... but I do see them buying potted meat... It’s the last resort on the way to Cat Food on Saltines.
I like the idea. IMO, dollar stores are gaining in prominence, not so much because people are getting poorer (incomes are up but people are spending money on stupid things like Starbucks coffee and expensive smartphone and cable TV packages), but because gasoline prices were, until the past few months, very high, making it less affordable to trek to the Walmart for a quick errand several times a week. The other thing is dollar stores have replaced the five and dime, as pharmacy behemoths like CVS and Walgreens have acquired rivals and jacked up convenience store pricing, and are competitive with Walmart even if you just consider the gasoline savings and ignore the time spent getting to Walmart, finding parking, and waiting on long lines.
The problem with BGS specifically, however, is that it's in hock to the gills. A small company like that ought to be issuing stock to fund some of its acquisitions. Its debt to equity ratio is higher than Kraft's, but its products have nowhere near the brand recognition of Kraft products. The risk is that it will be squeezed by the big dollar store chains, which are consolidating (e.g. Dollar Tree just bought Family Dollar, and 99 Cents Only's PE owners are probably looking for a buyer), and run into cash problems.