The late, great alternative journalist Hunter S. Thompson once wrote “… when the going gets weird, the weird turn pro.” Thompson would’ve loved the current market conditions. From a once-unthinkable downgrade of U.S. Treasury bonds and the ensuing global turmoil created by the revised perception of America’s credit quality, things are certifiably weird — not that they were that well-adjusted anyway.

Many investors have signed up for that weirdness, punishing equity prices mercilessly while rewarding the culprit: the Treasury bond. Go figure. So what do you do? Follow Thompson’s maxim and go pro.

With bond yields at absurd, ridiculous historical lows (now compounded by what some pundits refer to as “stealth” QE3), dividend-paying equities make a lot of sense. However, with a bumbling economy, growth is, at best, anemic. It will pay to be choosy and play defense. So if you’re turning pro or already have, then you’ll look at defensive sectors like consumer staples. People gotta eat.

There are the usual suspects: Kraft (NYSE: KFT), Campbell’s (NYSE: CPB), Proctor & Gamble (NYSE: PG) at the top of the list. These are great names that will work over time. But what if you could buy decent food brands with strong earnings per share (EPS) growth and pick up more than 100 basis points in yield? You can if you take look at B&G Foods (NYSE: BGS).

B&G was founded in New York City in 1889 by the Bloch and Guggenheimer (the “B” and the “G”) families: European immigrants who, like millions of others, came to America seeking a better life. Initially, B&G made and sold pickles. Today, the company has leveraged that pluckiness to a market capitalization of $840 million and a stable of successful, national, packaged food brands including Cream of Wheat, Ortega and Las Palmas Mexican foods, Emeril (Lagasse) branded products, and others.

With choppy markets and economic uncertainty ahead, it’s time to be a pro and play some defense. If that’s the case, then B&G makes a lot of sense.

Strong brands + above-peer growth + pricing power = gains for investors
B&G has a couple of things in common with its larger peers. The company makes packaged foods, and its portfolio includes some venerable, famous brands. That’s where the similarities end. The biggest difference is the most important: growth. BGS is growing distribution, revenue and earnings at a phenomenal rate. And because of its small size, the company can move much faster than its bloated brethren.

The big boys can earn mountains of money, and their revenue streams, thanks to the size of their brand equity, are relatively predictable. Kraft, for example, has delivered year-over-year average quarterly earnings growth of 4.2% — respectable, especially when you take the enormity of the company into consideration (the stock has a $60.5 billion market cap). B&G, on the other hand, is clocking in earnings growth at about 44% year-over-year, from $0.18 per share for the second quarter of 2010 to $0.26 per share for the same quarter this year. Those numbers should wet your appetite.

Distribution growth is cooking as well. In the first half of this year, sales of B&G products in the dollar store segment grew by 91%, from $2.72 million to $5.2 million. Thanks to this pop, dollar store sales now represent 2% of the company’s total sales. Sales in Wal-Mart (NYSE: WMT) stores increased 11% in the first half of the year, from about $29.5 million to $32.8 million. Double digit sales growth at the nation’s largest retailer is no small feat.

Earlier this year, B&G Foods announced average price increases of 2.5% across the board. These increases will take effect beginning this month and in September. And while B&G has a proven track record of organic growth, it’s also prepared to grow by acquisition. Currently, the company has more than $100 million in cash, and management has expressed that M&A is its primary focus for capital allocation.

Action to Take –> BGS shares trade near $17.50 and have a dividend yield of 4.8%. With a trailing price-to-earnings (P/E) ratio of 17.3 and a forward P/E of 16.1, B&G Foods looks like bargain at this level.

With a jumpy market and an increasingly uncertain economic outlook, the stock makes a smart addition, thanks to its defensive posture as a consumer staple. The company has a proven track record executing and delivering real growth. Based on projected 2013 EPS of $1.09, the P/E should grow to 21.1 which implies a 12-month price target of $23. Throwing in the dividend, this would give investors a total return of 36%. Judging by the market’s recent behavior, that’s a pretty decent return for a defensive stock.

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