How To Win The Hot-Dog Investment Contest

Inside today’s Daily Journal…

How To Win The Hot-Dog Investment Contest 

Plus…

• Silver hits $100

• GE spin-offs unlock value

• Booz Allen posts strong quarter

• Chart Of The Day: Franco-Nevada 

• Today’s Mailbag

If Your Advisor Is Recommending Fixed Income, Consider These Stocks Instead

On July 4, 2021, Joey Chestnut ate 76 hot dogs in 10 minutes.

It was during Nathan’s Famous Fourth Of July hot-dog-eating contest in Coney Island, New York. Eating that many hot dogs is difficult to imagine. It hurts just thinking about it. But it’s not the most astounding thing that’s ever happened with Nathan’s hot dogs. What those hot dogs have done for investors is even more incredible.

Since 2002, Nathan’s Famous (NATH) has delivered a staggering total return of over 5,500% – that’s 17% a year, year-after-year.

That dwarfs the returns of even the “hottest” tech stocks. The Invesco QQQ Trust (QQQ) – which tracks the Nasdaq-100 and is stuffed with the likes of Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA) – has “only” returned about 1,150% over the same period, or roughly 10.6% annually. Even over the last decade, when tech has seemingly outperformed everything, hot dogs win. Nathan’s total returns are over 200%, beating QQQ’s 180% gain.

How did crappy hot dogs beat the most iconic, fastest growing, most important businesses in the world?

Nathan’s business model is the Mona Lisa of the single most important concept in equity investing: the unmatched power of capital efficient businesses. These are businesses like Domino’s Pizza (DPZ) and The Hershey Company (HSY) and McDonald’s (MCD) that, through a mix of product characteristics and business models, don’t have to invest heavily in their own businesses to foster growth.

These businesses don’t burn through billions on R&D labs, or invest in data centers or moonshot acquisitions. As a result, far more of their annual earnings can be spent directly rewarding shareholders. With high-margin products, these businesses can spend a huge percentage of their revenues paying dividends and buying back shares, providing a steady return for investors that doesn’t require visionary management.

Founded in 1916 by Polish immigrant Nathan Handwerker, Nathan’s started as a humble hot dog stand in Coney Island, selling dogs for a nickel. Today though, Nathan’s Famous doesn’t sell hot dogs at all. It doesn’t make them either. There are no factories or restaurants. Nathan’s simply licenses its brand, recipes, and trademarks to third parties, like Smithfield Foods (SFD).

In fiscal 2025, Nathan’s licensing revenue hit $130 million. And how much did the company have to spend on capital investments to produce this revenue? Virtually zero. Less than 1% of sales.