Happy Birthday, USA! Have a hot dog (or 70)July 3, 2014: 9:30 AM ET
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
Fireworks may be the ultimate Independence Day tradition. But thanks in large part to ESPN, Nathan's Famous Fourth of July Hot Dog Eating Contest has quickly become a fun way to celebrate America's birthday as well.
Joey Chestnut has won the event for the past seven years. He set a new record in 2013, downing 69 frankfurters at the Nathan's in Coney Island. Three cheers for Brooklyn!
Most people will be watching on Friday to see if Chestnut can emerge victorious for the eighth straight year ... and perhaps top the 70 wiener mark. It would be the most disgusting "athletic" accomplishment ever. Apologies if the image below makes any of you queasy. I found it on SportsGif.com and felt compelled to include it here.
Update 7/4: Chestnut won again! He scarfed down "only" 61 hot dogs this time. He also proposed to his girlfriend ... and she said yes. I hope he didn't hide the ring in a bun!
But I'm a stock dork. And Nathan's Famous (NATH) is actually a publicly traded company that I've written about before. So now's the perfect time of year for an update.
Due to the growing popularity of competitive eating, I first decided to look at Nathan's Famous back in 2006. At the time, I noted that the stock was not followed by any mainstream analysts and was very thinly traded. So that made it a bit of a gamble.
However, I also pointed out that the stock was trading at a reasonable valuation and that earnings were growing rapidly. So I concluded that the stock might be a good bet "if you're a sultan of sauerkraut with a healthy appetite for risk."
I did another piece on the stock in 2012. And proving that I have no shame whatsoever, I wrote that "Nathan's stock may add some relish to your portfolio."
I wish I had followed my own advice. Nathan's shares are up more than 80% in the past two years and have surged 300% since 2006. To put that in context, the S&P 500 is up just 45% since 2012 and 56% in the past eight years.
Hot dog! (Which is also one of the more underrated ... albeit goofy ... Led Zeppelin songs by the way. Let's take a listen to this 1979 live version.)
Nathan's has also outperformed other well-known fast food stocks like McDonald's (MCD) and Yum! Brands (YUM) since 2006 and 2012. And Nathan's has even beaten Chipotle (CMG), Wall Street's momentum restaurant darling, over the past two years. (Chipotle has been a better stock since 2006 though.)
So what now? Is Nathan's still a buy?
Even though the stock has been pretty much going straight up for the past eight years, the story hasn't changed all that much since 2006.
Nathan's is still a small company. Its market value is about $240 million. It's still not covered by any Wall Street firms. And the volume is still miniscule: only about 10,000 shares exchange hands on an average trading day.
The stock may still be worth a look though because the fundamentals remain attractive.
While Nathan's was hit hard by Superstorm Sandy in 2012 -- the flagship store at Coney Island was closed for seven months -- it has bounced back and seems stronger than ever. Sales were up 16% in the fiscal year that ended in March. Profits rose nearly 12%.
Nathan's also continues to have the backing of some big investment firms. Hedge fund Steel Partners (SPLP), Mario Gabelli's GAMCO and Dimensional Fund Advisors were big holders of Nathan's two years ago ... and still are.
The one notable thing that has changed since I last wrote about Nathan's is that it no longer has a nasty legal battle over licensing with SMG, its top hot dog supplier.
All that is over. Nathan's replaced SMG as its exclusive supplier this March with John Morrell & Co., which will be paying Nathan's a bigger guaranteed annual minimum royalty and a higher percentage of net sales than SMG did.
The only major concern is a lack of any estimates to help investors figure out where the company is going. Because there are no analysts covering the stock, investors have to look at profits for the past year to judge it instead of valuing it on expected future performance.
Nathan's is not the cheapest stock out there, trading at about 30 times earnings per share from its last fiscal year. That makes it more expensive than McDonald's on this basis. But it is more of a bargain than Yum! and Chipotle.
So even though stuffing 70 Nathan's hot dogs in your mouth in 10 minutes may make you sick, buying this quintessentially American stock probably won't give you an upset stomach.
Say like Bill Pullman ... "Today we celebrate our Independence Day!" If the hot dog eating contest is too revolting for you, might I suggest a musical about revolting? One of my best friends has the cool tradition of watching the movie version of "1776" on the morning of the 4th. Not so cool? He also sings. (My name is Richard Henry Lee! Virginia is my home.)
Happy 4th of July, readers! Here's a bonus song for you: an aptly titled tune by Soundgarden off their classic Superunknown album ... which just got a fancy 20th anniversary re-release. (I'm old!)
Reader Comment of the Week ... and time for a Buzz vacation! I cited a tune covered by Metallica in Tuesday's column about Facebook (FB).
That prompted one Twitter follower to make a clever allusion to Facebook's COO with a slight alteration to the title of one of Metallica's most well-known songs. (Hint: It was the intro music for the greatest reliever in baseball: Mariano Rivera.)
Nice work, LifeSciencesMkt. Say your prayers little one. And congrats! This is your third RCOTW win this year and fifth since last November. You might be the Mo of snark! (Sorry @BostonBroker33, you can be the Koji Uehara of sarcasm. Or Papbelon? Not the same. I know.)
Anyway, this is my last column until Tuesday, July 15. I'm pulling a Springsteen and heading to the Jersey Shore next week. But I'll be back tweeting on Monday the 14th ... one day after the World Cup final. Will France be celebrating more than just Bastille Day then? Hmm. What's that? You want to hear Bastille Day by Rush? Okay! Buh-bye!