Going Green: Organic foods a growth stock

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

Investors looking for a way to profit from the increasing popularity of organic foods in the U.S. have a growing number of options, including ADF Foods (NATL INDIA: ADFL). Foreigners can as of this year invest directly in Indian stocks.

This company’s latest earnings announcement was on Dec. 19, and its shares closed up in anticipation of the announcement by 6.72 percent on Friday at 72.30 Indian rupees per share. A dollar today is equal to approximately 54.29 Indian rupees.

Sales figures released this week showed ADFL generated 2.9 billion rupees in revenue for the quarter ending Sept. 20, 2012, up approximately 200,000 rupees from the previous three months, but down by about 1 billion rupees from the same period a year earlier.

Shares of ADFL closed down a bit on Thursday, Dec. 20, 2012, at 76.75 Indian rupees. Volume was 29,892. The previous day’s close for the shares was 76.85 Indian rupees. The one-year high for the stock was 81.20 Indian rupees.

The rupee has been volatile during the last year, and has been soaring during the last few weeks, bolstering the sales and earnings of firms that do business in that currency. More on the currency volatility in a moment.

With an increasingly global presence, ADFL the “publicly traded food processing company creates pickles, chutneys, spices, and canned and frozen dishes,” a company spokeswoman tells the Motley Fool.

Other public companies riding the organic food wave include Whole Foods Market (NASDAQ: WFM), the Austin-based retailer. Whole Foods Market announced on Thursday that boutique, farm-raised Point aux Pins oysters produced in Grand Bay, Alabama, and processed at Bon Secour Fisheries are now available in the retailer’s stores in the South region.

Rivals Kroger Foods (NYSE: KR), and SuperValu (NYSE: SVU), which are increasingly making a play for the healthy food consumer, adding organic food offerings to its established brands at stores across the U.S. These stores may start to resemble WFM more and more in the coming years.

A new Kroger store opened this month in Dallas. The more than 60,000-square-foot building distinguishes itself from rivals with its focus on "fresh" items. A spokeswoman for firm told local media in Texas the company's "fresh fare" enables it to target a "more prominent demographic," e.g. wealthier consumers.

SuperValue is still subject to market speculation that it will merge with another grocer, but that news has been overshadowed this week by an analyst upgrade of the supermarket chain.

Definitely companies to to watch for investors: KR, SVU, and WFM.

According to the Mayo Clinic’s publication, Nutrition and Healthy Eating, once found only in health food stores, “organic food is now a regular feature at most supermarkets.”

Five years ago, the Indian company cited above, ADFL, began using clean, certified organic, non-GMO (genetically modified organism) project verified, and humanely raised ingredients due to a deep respect towards animals and the environment. ADF Foods’ mission is to provide consumers with products that are clean, organic and natural.

The spokeswoman tells Motley Fool that the more that consumers become educated about how animals are treated and food is processed, the more they understand the importance of organic foods, and companies like ADF.

 Ashoka is the company’s flagship brand and is the leading Ethnic Indian food brand made in India, and is probably the widest distributed ethnic Indian brand in the world, and includes ready-to-eat curries, ready-to-cook vegetables, and microwaveable rice, among other foodstuffs.

The company also owns other brands including PJ’s Organics, an organic frozen burrito, and Nate’s Meatless Meatballs, a vegan meatball.

The company was founded in 1932, and, like other Indian firms, is benefitting from the rebounding rupee. The company has a 1.5 billion rupee market cap, and its shares closed on Friday near their 52-week high of 76.15 rupees. The average share volume has been 59,000, and there are approximately 20.2 million shares outstanding, according to Bloomberg Businessweek. I make a cautious buy recommendation for this stock for investors looking to ride the organic food wave, and with the stomach to take the volatile rupee's gyrations.

 

-- Gene J. Koprowski is an Emmy Award nominated business journalist and author of Nanotechnology in Medicine: Emerging Applications (Momentum Press, 2012), and other books on health and business.


Gene J. Koprowski has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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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