When I left my former career in January to work full-time as a writer, including the writing I do here as a Blogger for the Motley Fool, I also rolled over a 401K. This is the fourth in a series of posts that document the companies that I am investing in, and I’m asking readers to follow along as I invest in some of the world’s best companies. Go here to see my portfolio in action, and click on my profile to the right to see other posts about this topic. Will you learn more from my successes, or my failures?
Only time will answer that question, but I hope my investing journey helps you make great decisions, and to avoid my inevitable mistakes.
It’s not just about better for you; it’s about the planet, too
Whole Foods Market, Inc. (NASDAQ:WFM) is a company that I’ve written extensively about. If you’ve never read the company’s “Declaration of Interdependence,” go here and read it. The central message is that all stakeholders — employees, customers, suppliers, shareholders — are important, and a successful business will see all stakeholders rewarded and successful. Also central to the Whole Foods Market, Inc. (NASDAQ:WFM) story is sustainability, including sourcing produce as local as possible, and keeping very high standards in regards to packaged foods, keeping a promise to customers that they won’t find unexpected ingredients and preservatives in these goods when they read the package.
The company’s efforts have paid off big for shareholders over the past decade:
Now I know what you’re thinking: Whole Foods Market, Inc. (NASDAQ:WFM) is way overpriced right now, and you’ve missed out. It’s TTM P/E valuation is over 37, and it’s forward PE is nearly 18, both well-above the average for grocers. Both metrics are trending on the higher side of its recent history, but neither ratio is on the extreme end of where shares have traded. Lastly, remember that the company is only about 1/3 of the way to the goal of 1,000 stores, and then decide if you want to hold off. In a word, don’t.
Whole Foods Market, Inc. (NASDAQ:WFM) is where I learned more about this next company: The Hain Celestial Group, Inc. (NASDAQ:HAIN)
It’s not diworsification! Really!
Peter Lynch used the term “diworsification” in the must-read One Up on Wall Street, to describe management that uses capital to acquire businesses for the sake of growth, not improvement of the business. And his analysis is spot-on for many corporate acquisitions and mergers that never bring about the improvements that management promises us.
However, The Hain Celestial Group, Inc. (NASDAQ:HAIN) founder and CEO Irwin Simon has proven to be the exception to that rule, having acquired a dozen or more brands over the past decade that have all strengthened the company’s position in the fast growing “healthy packaged foods” business. Simon has been able to acquire brands that bring value to The Hain Celestial Group, Inc. (NASDAQ:HAIN), and integrate them into the company in a way to leverage scale, while also maintaining the brand identity of each product.
Just like with Whole Foods Market, Inc. (NASDAQ:WFM), long-term investors in The Hain Celestial Group, Inc. (NASDAQ:HAIN) have been well rewarded:
The Hain Celestial Group, Inc. (NASDAQ:HAIN) is still a relatively small company, having generated just over $1.6 billion in revenue over the past year. Compare this to Kellogg Company (NYSE:K), which generated almost nine times as much revenue, over $14 billion in the past twelve months, and this is a good reminder just how early we are in the game for The Hain Celestial Group, Inc. (NASDAQ:HAIN). And while investing in Whole Foods Market, Inc. (NASDAQ:WFM) is concerning for some, as organics and “better for you” foods become more prevalent on the shelves of traditional grocers, Hain’s products are the ones showing up on those shelves in growing numbers.