A Regular Fool's Retirement Portfolio: Better for You Foods

Jason is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

When I left my former career in January to work full-time as a writer, including the writing I do here as a Blogger for the Motley Fool, I also rolled over a 401K. This is the fourth in a series of posts that document the companies that I am investing in, and I'm asking readers to follow along as I invest in some of the world's best companies. Go here to see my portfolio in action, and click on my profile to the right to see other posts about this topic. Will you learn more from my successes, or my failures?

Only time will answer that question, but I hope my investing journey helps you make great decisions, and to avoid my inevitable mistakes. 

It's not just about better for you; it's about the planet, too

Whole Foods Market (NASDAQ: WFM) is a company that I've written extensively about. If you've never read the company's "Declaration of Interdependence," go here and read it. The central message is that all stakeholders -- employees, customers, suppliers, shareholders -- are important, and a successful business will see all stakeholders rewarded and successful. Also central to the Whole Foods story is sustainability, including sourcing produce as local as possible, and keeping very high standards in regards to packaged foods, keeping a promise to customers that they won't find unexpected ingredients and preservatives in these goods when they read the package.

The company's efforts have paid off big for shareholders over the past decade:

<img alt="" src="http://media.ycharts.com/charts/2575c53d7ee2d2ecc3e12f66f3cf9c9e.png" />

WFM data by YCharts

Now I know what you're thinking: Whole Foods is way overpriced right now, and you've missed out. It's TTM P/E valuation is over 37, and it's forward PE is nearly 18, both well-above the average for grocers. Both metrics are trending on the higher side of its recent history, but neither ratio is on the extreme end of where shares have traded. Lastly, remember that the company is only about 1/3 of the way to the goal of 1,000 stores, and then decide if you want to hold off. In a word, don't. 

Whole Foods is where I learned more about this next company: Hain Celestial (NASDAQ: HAIN)

It's not diworsification! Really!

Peter Lynch used the term "diworsification" in the must-read One Up on Wall Street, to describe management that uses capital to acquire businesses for the sake of growth, not improvement of the business. And his analysis is spot-on for many corporate acquisitions and mergers that never bring about the improvements that management promises us.

However, Hain founder and CEO Irwin Simon has proven to be the exception to that rule, having acquired a dozen or more brands over the past decade that have all strengthened the company's position in the fast growing "healthy packaged foods" business. Simon has been able to acquire brands that bring value to Hain, and integrate them into the company in a way to leverage scale, while also maintaining the brand identity of each product.

Just like with Whole Foods, long-term investors in Hain have been well rewarded:

<img alt="" src="http://media.ycharts.com/charts/659cc6868ae445eb06e0b58d121a49ae.png" />

HAIN data by YCharts

Hain is still a relatively small company, having generated just over $1.6 billion in revenue over the past year. Compare this to Kellogg, which generated almost nine times as much revenue, over $14 billion in the past twelve months, and this is a good reminder just how early we are in the game for Hain. And while investing in Whole Foods is concerning for some, as organics and "better for you" foods become more prevalent on the shelves of traditional grocers,  Hain's products are the ones showing up on those shelves in growing numbers. 

Make mine to go

Chipotle Mexican Grill (NYSE: CMG) is also taking advantage of the shift in consumer demand towards foods that are better for us and the planet, for people looking for a meal on the go. While many fear that the Chipotle concept is limited as to how much more it can grow, I'm convinced that with only 1,400 or so locations (less than 30 per state) there's still plenty of room to expand, and that's just domestically. International growth potential is immense; and we haven't even talked about the new ShopHouse Southeast Asian concept. It may have as much potential as Chipotle's flagship. 

Lastly, Chipotle also carries a rich valuation, with a forward PE ratio in the mid-30's, but when we look at its historic PE valuation, the company is well within the medium to low end of Mister Market's value range. And with so much growth potential, you could miss out on a "ten bagger" waiting for a more McDonald's-like valuation in the low-20s.  

Water is heavy; add the bubbles at home!

SodaStream's (NASDAQ: SODA) basic technology and concept has been around for decades, with little real success in North America until recently. With it's IPO in late 2010, and using much of the capital raised from the IPO to start aggressive expansion, the Israeli company has started to establish a strong foothold into the soda business in the U.S. Two recent reasons for investors to dig deeper: Recent deals with Samsung for built-in dispensing systems in its refrigerators, and just this week with KitchenAid for co-branded home carbonators, further establishing more mainstream adoption channels for its products.

There is serious potential for heavy competition from PepsiCo and Coca-Cola as SodaStream takes more market share from the two bubbly water heavyweights. But I've maintained since I started following the company that a partnership seems much more likely to me, if not an outright acquisition.

Foolish bottom line

I've invested in all of these companies, and for me, the optimal holding period is "forever." Only time will tell how it works out, but I can't think of another five companies that are all more central to the shifting way we consume and think about foods, both at home and on the go. That's a great sign that in the long-term, I'll be rewarded. 

What do you think? Tell me in the comments below.


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Jason Hall owns shares of Chipotle Mexican Grill, Whole Foods Market, SodaStream, and Hain Celestial. The Motley Fool recommends Chipotle Mexican Grill, Hain Celestial, SodaStream, and Whole Foods Market. The Motley Fool owns shares of Chipotle Mexican Grill, Hain Celestial, SodaStream, and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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