Get Some 'Healthy' Returns
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Although there have been some miserably performing IPO’s this year (do we really have to mention Facebook yet again?) some of the best have come from the natural foods sector. Certainly old pros in the sector like Whole Foods Market, Inc (NASDAQ: WFM) and The Hain Celestial Group, Inc have been hitting all time highs and cranking out profits like they were making homemade ice cream (natural of course!), but some of these IPO’s might have flown under your radar and are worth a look.
New Kids On The Block
Vitamin Cottage Natural Foods Inc (NYSE: NGVC) just debuted on July 27 and soared 33% from $13.00 to $17.12. The company was founded in 1955 so it’s no Johnny-come-lately. It is considered a member of the grocery store industry and operates mainly in the Midwest, Southwest and US Mountain states. The company has been likened to a smaller Whole Foods Market or The Fresh Market, Inc.
As it’s a brand spanking new publicly traded stock, it’s hard to find certain statistics like the short float or institutional hold but checking insider transactions there does seem to be a good deal of sell activity by Isely family members (three Iselys are officers and the CEO is Kemper Isely) and associated trusts; then again, it’s difficult to find out what percentage of the shares they held before. Still, it trades at a trailing P/E of 1.88, quarterly earnings growth is 123.20% year over year, and quarterly revenue growth is 28.30%. As this one is so brand new and difficult to study I would wait on it unless I lived in the areas where they have stores and could personally visit multiple times. Or at least wait until more info comes out about the float and its first earnings report.
Annie’s Inc (NYSE: BNNY) has been a standout among IPO’s this year. I must disclose my enthusiasm by saying my family loves their white cheddar mac n’cheese, and their Goddess salad dressing is great; these are only two of the 125 products they make. This company rose 72% on the day it debuted and has barely looked back since. You’d think a fox was on their tail the way they’ve run, but this smaller version of Hain Celestial has no debt, an operating cash flow of $8.92 million, and while they didn’t beat on earnings (July 24), their net sales were up 20%. Annie’s primarily operates in the US and in an SEC filing claimed that the US is the largest market for organic and natural foods.
The Berkeley, CA based company also has a Chief Mom Officer, Sarah Bird, and it turns out more and more big food companies are hiring them for marketing and engagement. I can’t help but like that. Only in Berkeley.
Now for Annie’s caveats: As a new IPO they are still working out the kinks and just received an NYSE notice that they hadn’t announced in a timely manner the date of their annual shareholders' meeting. They also announced on August 1 a secondary offering at $39.25 a share. The stock is currently trading at $41.90. The P/E is 92.39 and the PEG is 1.95. Then the insider hold is only 4.04% and the institutional hold is 13.70% while shares held short is at 18.40%. That said, Annie’s is in a sweet sector that is finding a lot of support.
Next up is Chuy’s Holdings, Inc. (NASDAQ: CHUY) a Texas based chain of Chipotle Mexican Grill-like restaurants, with 27 restaurants mainly located in Texas and the Southeast. It aspires to grow a steady 7-10 restaurants a year. The stock rose 16% on its IPO debut on July 24 and hit a two week high of $18.47 from its low $14.33 IPO price. It’s strange somehow mentioning two week and one week highs. Like a younger Chipotle, the P/E is high at 150.00 and trading volume is thin right now. The company has very little debt but quarterly earnings growth year over year is -70.00% while quarterly revenue growth year over year is 28.30%. This one did not seem to get the amount of press that Annie’s did before its IPO but is steadily climbing since. Chipotle should be looking over its shoulder at this one as it has a sassy “Tex-Mex Unchained” motto and philosophy that aims to hit squarely at the behemoth that is Chipotle.
Baby Mo-Mo’s ?
Are these three freshmen on their way to outdo the big winners they have been likened to? Like all IPO’s there will be selling after lockups and misses. Also, be careful because trading volumes on these can be thin and/or volatile, but this sector of natural food is a trend that can’t be denied. With a grocer, a restaurant and a food manufacturer you have a choice of speculative winners here. Over time these may outperform their big name role models and add some ‘healthy’ returns to your portfolio.
leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of Chipotle Mexican Grill, The Hain Celestial Group, and Whole Foods Market. Motley Fool newsletter services recommend Chipotle Mexican Grill, The Fresh Market, The Hain Celestial Group, 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.If you have questions about this post or the Fool’s blog network, click here for information.
