Socially Responsible Investing Is Gluten Free
Brenda is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Millions of Americans, this blogger included, are finding that they feel better and are losing weight by eliminating wheat gluten from their diet. According to the book "The Wheat Belly," it is not just the gluten in wheat that has become extremely hard to digest through genetic modifications, and it is wise to avoid the whole plant.
I predict that in the next twenty years, wheat will either be re-engineered to remove the genetic modifications that make it both indigestible and addictive, or gluten free alternatives such as rice, amaranth and other grains will be revived and made the standard. This means that either conventional food companies will have to adapt (and some are), or the new gluten-free companies will end up winning market share and become solid long term stock plays.
The forerunner and owner of both the Udi's and Glutino brands is Boulder Brands (NASDAQ: BDBD), formerly known as Smart Balance. A small- to mid- cap with a bright future, Boulder Brands changed its name in January.
With a one year price change of 76.9%, a quick ratio of 0.8 and a current ratio of 1.5 suggesting reasonable debt amounts, not to mention a reasonable beta of 1.02, this stock looks like a bargain at around $10 per share (with 59.5 million outstanding shares). Imperial Capital just initiated coverage on this stock, giving it an "outperform" rating. The firm set a price target of $16, and expect a three year price growth rate of 10%.
One area for concern is the high PE ratio: 161.81. It may make sense to buy a small amount now, and watch the PE ratio.
H.J. Heinz Company and Berkshire Hathaway
One of the big boys beginning to play in the gluten free space is H.J. Heinz (NYSE: HNZ), which has announced the completion of its acquisition by Berkshire Hathaway. Given this acquisition, we can't base an analysis on Heinz's fundamentals alone, but the company is well-posed to leverage its gluten free BiAglut brand for success in the gluten free space, which is mostly now distributed in Europe. Most of the major Celiac disease sites have a link to the BiAglut website. Heinz is a household name; should it decide to sweep this market, it has both the resources and marketing capacity to do so.
A company that plays in the large cap space and is already in the gluten free arena is General Mills (NYSE: GIS). With $17 billion in annual sales and distribution in over 100 markets, General Mills is a giant and a solid blue chip. The company has generated a Global Responsibility report for 2013, and health is the first priority discussed. Its Betty Crocker brand launched the first gluten free recipe contest, gluten free Bisquick has been made available, and Chex cereal has been reformulated to be gluten free. The company has come under fire for having some sugary cereals and GMO based foods. It is this Fool's assessment that General Mills is moving the ship in the right direction. The stock offers a 3.2% dividend yield, a CAPS rating of 4 out of 5, and a price to earnings ratio of 17.2. I'm putting my money on the Pillsbury Doughboy, this time, a gluten free version.
Bob's Red Mill
One way to make money is to keep a sharp eye on what is selling very quickly -- and Bob's Red Mill products are very popular. Unfortunately, Bob's is still privately held. Hopefully, as its popularity rises it will consider an IPO to infuse more cash (and visibility) into its socially responsible, sustainable operations. Keep an eye on this one.
Social pressures on our food producers to eliminate GMOs and gluten are increasing. One way to keep the pressure high is to invest in socially responsible companies. Some of the traditional companies are making the move to social responsibility, but we can't expect this change to happen over night. But if we invest in the right companies, we can ride the gluten free wave right to the bank, for the long haul.
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Brenda Johnson has a position H.J. Heinz Company. The Motley Fool recommends H.J. Heinz Company. 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!