Grab Industry Dominating Companies When the Market Dislikes Them

Some industries are more concentrated than others. While hundreds of bank stocks flourish, for instance, there are only a handful of companies with the overwhelming share of the soft drink market.

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  • Markets with an oligopoly, or even a duopoly, tend to become commonplace after an industry consolidates. That also makes those stocks solid investment choices. While a mature and slow-growth industry may not seem like an exciting play, having just a few players keeps those companies profitable.

    One such area is in packaged spices and condiments. Here, a few companies dominate the space. The biggest player is McCormick & Company (MKC).

    Shares are flat over the past year, and the company reported somewhat underwhelming earnings. But it’s a company in a space that will never go out of style. Even with rising costs right now, most consumers won’t want to give up the simple pleasure of their favorite spices at meals – even if they give up going out to restaurants to do so.

    Action to take: Shares are fairly priced. But the company has an estimated 40-60 percent market share for the spice industry, with other players including store-brand names. The branding power has allowed the company to be a solid long-term winner. It’s even a dividend growth play, with a 1.7 percent starting yield now.

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  • For traders, shares have been in a downtrend, but have moved higher overall in recent sessions. The September $90 calls, last going for about $2.35, can likely return mid double-digit gains in the next few weeks.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.