Last summer, I took a giant leap of faith. Instead of suggesting where to invest and then never revisiting my original thesis, I pledged to put my own money behind 10 stocks. My goal was to build the World's Greatest Retirement Portfolio. Almost one year through, and the portfolio is dominating the S&P 500 -- outperforming the index by 18 percentage points!
Today, I'm happy to state that after almost a year, I'm just as bullish on one of those 10 -- Whole Foods Market
Revisiting my thesis
My interest in Whole Foods was originally piqued for two key reasons. First, everyone needs food, so there's some level of safety investing with a company that provides it. But the second reason -- the rise of the importance of organic food -- is what separates Whole Foods from competitors like Safeway
|
Year |
Total Food Sales |
Organic Food Sales |
Organic Penetration |
|---|---|---|---|
| 2000 | $498,380 | $6,100 | 1.2% |
| 2002 | $530,612 | $8,635 | 1.6% |
| 2004 | $544,141 | $12,002 | 2.2% |
| 2006 | $598,136 | $17,221 | 2.9% |
| 2008 | $659,012 | $23,607 | 3.6% |
| 2010 | $673,324 | $26,708 | 4% |
| Annual Growth Average | 3.05% | 15.9% |
Source: Organic Trade Association. All numbers in millions.
With just 4% of all purchased food being organic, there is enormous potential for healthy eating to get a bigger slice of the pie.
Given these industrywide statistics, Whole Foods served up the type of results one would expect. Take a look at how revenue, income, and comparable-store sales have grown since I recommended buying the stock.
|
Reporting Period |
Revenue Growth |
Income Growth |
Comparable-Store Sales Growth |
|---|---|---|---|
| Q2 2011 | 10.9% | 34.7% | 8.4% |
| Q3 2011 | 12.3% | 31.3% | 8.7% |
| Q4 2011 | 12.9% | 33.4% | 8.7% |
| Q1 2012 | 13.6% | 30.9% | 9.5% |
Source: Company earnings releases.
Numbers like these are virtually unheard of in the grocery industry. Only newcomer The Fresh Market
Perhaps the most important number is the comparable-store sales growth, as it indicates that the company is growing revenues by driving traffic -- rather than just by opening up more new stores (more on that in a moment).
As you might have guessed, this has led to impressive performance since last year. Had you invested $4,000 in Whole Foods, you'd be sitting on gains of about $1,400 -- whereas an investment in the S&P 500 would have actually lost money.
Why I'm still bullish
I think the information I've provided here offers more than enough reason to be bullish on Whole Foods, but the company has further characteristics I find promising. I fully believe that education is the key to pushing the company's message of healthful organic foods forward. Whole Foods already has a program in place to rate the sustainability of its seafood products, and starting in 2013, the company will be launching a "Health Starts Here" campaign that rates the healthiness of various foods on a scale of 1 to 5.
On top of that, the company still has lots of room for growth. Co-CEO John Mackey has stated several times he believes the company can grow to 1,000 stores domestically; today the company is just approaching one-third of that level.
It doesn't hurt that the company also offers up a small dividend -- which I believe will grow substantially as the company comes closer to its goal of 1,000 stores.
A solid bet for your retirement
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