The “good for you, good for the planet” factor
Whole Foods Market, Inc. (NASDAQ:WFM) is much more than just a niche player in a niche market. With over 300 stores and $12 billion in annual sales, its growth story is far from over. It’s easy to look at Whole Foods Market, Inc. (NASDAQ:WFM)’s forward price to earnings (PE) valuation of 18.5 and think that Whole Foods is too expensive when compared to a grocery heavyweight like The Kroger Co. (NYSE:KR), with a forward PE 50% lower, around 12.
But to do so would miss the point: THe company is consistently growing, around 12%-15% annually, while The Kroger Co. (NYSE:KR) is in the mid-single digits. Plus Whole Foods’ operating margins are far and away tops in the grocery business, historically averaging above 5% when most grocers are happy if they can break 3%. Factor in a plan to reach 1,000 stores in the next couple of decades, and this is a cornerstone investment, driven by growing demand for fresh and packaged foods that are better for people’s families and the world we live in.
The brand value factor
Starbucks Corporation (NASDAQ:SBUX) is one of the most recognized brands in the world, and it’s added several other well-known brands over the years, including Tazo, Teavana, Evolution Fresh juices, and most recently La Boulange French bakery.
And even as the company works to continue expanding its core stores, the growth potential of these other names is significant, both leveraged inside Starbucks Corporation (NASDAQ:SBUX) stores, as well as independently. Its greatest potential, so far yet to be fully realized could be the value of these brands at retail outlets like Kroger and even Whole Foods.
Another company that’s sometimes panned as overvalued, Starbucks’ premium performance demands a premium price.
Foolish bottom line
These companies share a handful of key reasons why I am invested in them all, with a timeline of “forever” in mind:
- Top management are either founders, have been involved with the business for decades, or made it what we know today
- Best operators and leaders of their segments
- They have all disrupted traditional markets and are relatively early in their growth stories, despite years of past success
While I wish I could take credit for this insight, it’s just simple, Foolish investing in it’s purest form. These are traits we would all be better served to look for in the companies we invest in. Will these four pay off in the long run? I’m betting on it. If these aren’t what you are looking for, click on my profile to the right to see other posts about this topic.
What do you think? Tell me in the comments below.
The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they’ll handsomely reward those investors who understand the landscape.
The article A Regular Fool’s Retirement Portfolio: Retail originally appeared on Fool.com.
Jason Hall owns shares of Amazon.com, Chipotle Mexican Grill, Starbucks, Costco Wholesale, and Whole Foods Market. The Motley Fool recommends Amazon.com, Chipotle Mexican Grill, Costco Wholesale, Starbucks, and Whole Foods Market. The Motley Fool owns shares of Amazon.com, Chipotle Mexican Grill, Costco Wholesale, Starbucks, and Whole Foods Market. Jason is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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