Companies Better for you and your Portfolio
Moustafa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Hopefully in the not so distant future I will be able to make the pilgrimage to Omaha to attend the Berkshire annual meeting and finally cross that off my bucket list. Until then I will have to live vicariously through the other Fools who made the trip and have reported their experiences on the boards.
After reading some of the posts and Fool analyst Jason Moser’s article about the 5 crucial investing lessons from Omaha, it got me thinking about different investing opportunities. One key insight in Moser’s article on which businesses to avoid really got me thinking, it was: The key is to avoid the businesses where you don't have a reasonable understanding in regard to earnings power and competitive advantage over the next decade and beyond. Having been in athletics for most of my life, I have always been very cognizant about my health and for the last decade have really focused on eating healthy, mostly organic and have become a serious label reader. I have witnessed over the last decade the explosion of the organic food industry, the growth of grocery stores like Whole Foods Market and the increased awareness to wellness by the public. The stats back me up in this regard as the organic food industry has been growing at a much faster rate over the last decade then the non organic food industry.
Since I have been watching this growth basically on the sidelines from an investors perspective, I finally got myself in gear and entered a position in Whole Foods Market (NASDAQ: WFM) Having watched Whole Foods growth year over year I am kicking myself now for not buying sooner. Living in a city without a Whole Foods Market, when I get the chance to travel I find it a real treat to peruse their aisles and see all the healthy products they carry. Whole Foods Market is definitely an upscale grocery store where you pay a premium for many of the products as they are either speciality or organic. These higher premiums allow Whole Foods to achieve much higher sales per sq/ft then other retailers like Safeway. I am obviously long on Whole Foods as not only do they offer a huge range of 'better for you' products, but they offer a phenomenal shopping experience that lends to customers returning to their stores on a weekly basis. I also see the growth prospects for them as they could easily reach 2 or 3 times as many stores in 3 to 5 years as they have now.
One thing I noticed, having enjoyed meandering walks through the aisles of Whole Foods was the amount of products that Hain Celestial Group (NASDAQ: HAIN) had on the shelves. Looking it up it seems that most whole Food's locations stock as many as 2,000 Hain products on their shelves. Hain has been recommended by the Fool and I fully agree, as I see it having the ability to continue to grow through improving sales and its policy of acquiring smaller better for you food companies. It also not only manufacturers its products, but distributes and markets them as well giving it a vertically integrated supply chain.
Going back to the advice garnered from Buffett by the fools, I definitely see both these companies succeeding in the competitive landscape while growing earnings over the next ten years. I see not only Whole Foods Market but Hain being leaders in an industry that will continue to grow moving forward. The aging trend of baby boomers that have become more and more aware not only of their health but the fact that they are aging is another trend that will lend to growth in both these companies. Though there are potential competitors in major multinational corporations like Nestle and Kraft entering the market and grocers like Safeway offering more organic options, they will be playing serious catch up. Whole foods and Hain both have over a decade head start and are firmly entrenched in the market. I see both companies continuing to grow and beating the market over the short term and extending into the long term.
mooseelz owns shares of WFMI. The Motley Fool owns shares of The Hain Celestial Group and Whole Foods Market. Motley Fool newsletter services recommend 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.