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.
A major league money manager says there is a “lot of upside” for those looking to invest in organic foods.
Just before Christmas, Turner Investments published a report noting organic foods have moved into the mainstream and are being purchased by more consumers. "As organic and natural foods appear on more consumer shopping lists, we think companies that manufacture and sell these products should enjoy healthy earnings growth in the years to come. These companies include: “Annie's (NYSE: BNNY), Hain Celestial Group (NASDAQ: HAIN), Natural Grocers by Vitamin Cottage, The Fresh Market (NASDAQ: TFM), Whole Foods Market (NASDAQ: WFM), and United Natural Foods (NASDAQ: UNFI).”
What is sparking the trend? Turner sees changing demographics and attitudes toward food as responsible for the market movement.
Baby boomers are now more affluent than ever and more discerning than they used to be when it comes to what they eat. No more Ho-Hos and Ding Dongs. We’re talking honey and whole wheat. Millennials, whom Turner defines as those born after 1980, are even more health conscious than Baby boomers, says Turner, a money manager based in the Berwyn, Pa., says.
"Sales in the U.S. organic-food industry have grown steadily from a mere $3.5 billion in 1996 to $31.5 billion in 2011. Most recently, from 2010 to 2011 the industry grew at a 9.5 percent rate, compared with about a 5 percent growth rate from 2005 to 2009," the report indicated.
Public companies riding the organic food wave, included in the report, were: Annie’s, which offers over 125 products and is present in over 25,000 retail locations in the United States and Canada. Founded in 1989, the company went public in 2012 and last month presented at the JPMorgan SmallMid Cap Conference.
Hain Celestial Group products range from tisanes or "herbal teas,” offered through the Celestial Seasonings brand to organic free range chickens from the FreeBird brand. The company also presented at the recent JP Morgan SmallMid Cap Conference, and has made a name for itself in the philanthropic community with its Thanksgiving dinners for the homeless in the Bowery in New York City.
Natural Grocers by Vitamin Cottage has filed an S-1 report with the SEC, as of last summer, planning to raise $115 million on the public markets. If the IPO is ever a go, I recommend that you buy.
United Natural Foods recently suffered a strike by its Teamsters’ affiliated workers. “The strike sent a strong message to the company that it needs to respect its workers and respect the bargaining process," said Chris Tarrats, a driver who has worked at United Natural Foods for six years, local news in Auburn, Ala. Reported. "My co-workers and I felt it was important to send that message, but also to keep the strike short so that we would minimize the disruption and inconvenience to our customers during the holiday season."
Stay away from United's shares for some time until labor relations cool down. Teamsters trying to hijack a company during the holiday season is not a pretty investment picture.
Of course, everyone knows about the big kahuna of organic foods, Whole Foods Market, the Austin-based retailer. Whole Foods Market announced recently 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. Yet another unique offering for customers equates to a buy recommendation for this stock. These guys know how to do it right.
Most of these stocks are from U.S. based firms. But investors looking for a way to profit from the increasing popularity of organic foods globally, including ADF Foods (NATL INDIA: ADFL). Foreigners can as of 2012, invest directly in Indian stocks, and ADFL, the world’s leading maker of chutneys, is definitely on my buy list.
-- 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. He has written extensively for Forbes, Investor’s Business Daily, The Wall Street Journal, The Washington Post, and for FoxNews.com.
Gene J. Koprowski has no positions in the stocks mentioned above. The Motley Fool owns shares of Hain Celestial and Whole Foods Market. Motley Fool newsletter services recommend Hain Celestial, The Fresh Market, 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!