The reason—valuation and possible disruption from management changes.
Green Chip Stocks has followed Wild Oats for nearly two years now. And the company has delivered. But with the market backing away from organic retailers lately, some investors question whether or not taking a position in one is such a good idea right now.
Heck, just last week, Whole Foods Markets (WFMI:NASDAQ), one of the country’s most successful and profitable grocery store chains, saw its stock fall more than 20% after it warned of slowing growth in spite of recent profits and new store openings.
Whole Foods Markets had delivered three consecutive years of double-digit comparable stores sales growth. But last Monday, company representatives announced they now expect sales growth between 6% and 8% for fiscal year 2007.
Investors heard that and dumped the stock fast.
Whether you embrace the premise or not, there is simply no doubt about it:
Peak Oil has the markets firmly in its grip.
In fact, the peak oil problem has become so big that the International Energy Agency (IEA) estimates that it will take well over $22 trillion in spending worldwide to correct the supply and demand imbalances that have sent the price of crude to the moon.
That will make for a pretty big pie for investors of every stripe to dig into!
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Canadian Green
Whole Foods Markets didn’t get to be one of the most profitable grocery store chains in North America by accident.
You see, the LOHAS market (Lifestyles of Health and Sustainability) is one of the most fertile markets for solid, long-term growth. And Whole Foods tapped it early—while no one else was paying attention.
This is where we Green Chip Investors can often be found snooping around for opportunities.
While shares of Whole Foods Markets and Wild Oats have both taken a bit of a nosedive over the past week or so, savvy Green Chip Investors are not only taking new, albeit smaller positions in these stocks, but also loading up on shares of the lesser-known organic food retailers that offer similar risk . . . but more bang for the buck.
Planet Organic (POH.V) is a perfect example.
Here’s an organic food retailer that pretty much runs the show in Canada when it comes to this market.
The company operates 62 stores throughout the country, and continues to deliver for investors.
Since the company has been public, it has finished with a gain EVERY single year!
But since it’s not a household name, like Whole Foods and Wild Oats, it gets little attention from the mainstream. Which, I can assure you, is fine with Green Chip investors looking for a solid organic food play at an extremely low price.
While Whole Foods Markets trades around $49.00 a share and Wild Oats trades for around $15.00 a share, Planet Organic closed the day today at $2.16 a share.
Now don’t get me wrong. I’m not saying Whole Foods Markets or Wild Oats won’t deliver for investors. Quite the contrary, actually.
Whole Foods Markets earnings are strong.
During the three months ended September 24, the company had net income of $39.8 million. During the comparable period in 2005, the company made $9.1 million. (This was after taking a one-time charge.)
And the company is still opening new stores left and right. Whole Foods’ CEO, John Mackey, expects to open 18 to 20 new stores this fiscal year.
Wild Oats, while not delivering super-impressive numbers this past quarter (same-store sales grew only about 1.6 percent), still maintains significant market share, too, despite some analysts who suggest the likes of Safeway and Wal-Mart will eventually steal their organic thunder.
Mark my words . . . this is not going to happen!
It is true that Safeway and Wal-Mart are beefing up their organic offerings. But the LOHAS market, more than 50 million strong (about 30% of US adults), is not going to go rushing into big-box retailers and conventional supermarkets for their organic food needs.
This is a loyal psychographic that will continue to spend their wads of cash at those stores that provide a complete LOHAS atmosphere. Organic foods, fair-trade coffee, yoga DVDs, etc.
A tiny company, with a $443 million market cap, finds $2.62 Billion worth of the yellow metal in their first spot!
With 2.9 million ounces, they have more gold in this one mine than the entire Federal Reserve Gold Holding of Australia, Canada and Mexico combined!
To top it off, it's so big that it's expected to produce 631% more gold per year than the average mine in China.
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Unfortunately, those who have not completely immersed themselves in this market cannot possibly understand it . . . or profit from it.
We saw this when Whole Foods Markets first went public and some analysts laughed it off as a ridiculous idea that would fall flat on its face within a year.
50 million LOHAS consumers disagreed!
Listen: The profitability of this market has been validated. This isn’t even a debate anymore. And as Green Chip investors we know that this market will continue to provide significant gains.
It happened with Whole Foods Markets, it’s happened with Wild Oats and it’s about to happen again with that little Canadian organic retailer I mentioned earlier . . . Planet Organic . Which, by the way, just recently announced a 549% net income increase from fiscal year 2005!
(Since 2001, Planet Organic’s annual revenues have grown by approximately 1,700% from $1.6 million to over $30 million!)
For more on organic food markets and the publicly-traded companies that operate within this industry, click here now.
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