Whole Foods' stock gain isn't the result of being buoyed by a blockbuster industry such as oil or homebuilding. While it was busy posting 35% annualized gains over the past decade, competitors such as Safeway
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What set Whole Foods apart from its competitors and the thousands of other public companies? For one, it was small and underfollowed. It was also committed to reinventing its space under dedicated management.
How could investors have found Whole Foods back when it was a $500 million small cap? It would have been difficult. Even at the end of 1996, Whole Foods was not yet consistently profitable. And while the revenue growth looked great, naysayers labeled organic foods and their premium prices as nothing more than a fad.
Whole Foods, however, had an X-factor in founder and CEO John Mackey. Like other great corporate leaders, he demonstrated an incredible commitment to his company, his employees, his mission, and his stakeholders. One indicator of this unique corporate culture is that Mackey limited the cash compensation of company officers to just 10 times that of the average full-time salary of all employees. And every year since 1998, Fortune has listed Whole Foods as one of the 100 best companies to work for.
While revenue continued to explode throughout the past decade, Whole Foods had some growing pains and working capital problems that prevented it from generating as much cash as possible. Yet Mackey continued to invest in the business and build an incredibly strong corporate culture. Those efforts started falling to the bottom line in 2001; the company now pays a dividend and has nearly erased its debt.
Crazy can work
The market's best stocks all set themselves apart. Firms like Whole Foods, Costco
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It's so crazy, it might just work.