Motley Fool’s “One American Brand” Could Double Within a Few Years

“ONE AMERICAN BRAND POISED TO POWER INTO THE GLOBAL MAINSTREAM!

“Every decade or so, a brand is born in America that goes up like a moon shot and becomes a recognizable symbol all over the world… Brands like Levis… Coca-Cola… Harley-Davidson… Heinz… McDonalds… GE… Budweiser… Disney… Gillette… Pepsi… The Gap… IBM… Wal-Mart… Apple… Nike… Microsoft… Intel… Dell… UPS… Starbucks… FedEx… Amazon… eBay… and Google…”

That’s how this recent ad for the Motley Fool Stock Advisor newsletter opens — and I bet you already know what they say next, right?

Yep, they’ll tell you the name of this “one american brand” … just as soon as you subscribe to their newsletter.

Now, you may or may not want a subscription to Stock Advisor — I kind of like the Fool guys in general, though their buy and hold newsletters have had a tough year. And you can always check out the reviews of their newsletters on the Stock Gumshoe Reviews service.

But really, if all you want is the name of this company … you’re already in the right place. We can figger that one out for you, no problem.

First, a bit more of the tease, to whet your appetite:

“Here’s the sweet spot in all this for you: David and Tom are right now recommending ONE STOCK SET TO POWER INTO THE GLOBAL MAINSTREAM… one single investment you can hold in your account for a decade or more and make a killing…

“And you’ll get the name, stock symbol, and full details today.

“To tell you all about it, I have to go back 29 years to 1980. Back to the days of a fitful stock market… and an uncertain future. Sound familiar?

“That’s because the best way to invest TODAY is the same it was in 1980. In fact, the process of building real wealth has been much the same throughout all of the stock market’s history (just ask Warren Buffett).

“I’m talking about identifying a few unique growth businesses poised to dominate their mass markets. And scooping up shares and holding them until the cows come home!”

The ad goes on to list a few examples — Wal-Mart, Nike, and Starbucks — where getting in early on a phenomenal new brand would have allowed you to build a fortune, despite some ups and downs along the way.

“The ONE AMERICAN BRAND POISED TO POWER INTO THE GLOBAL MAINSTREAM I’m about to describe shows remarkable similarities to Wal-Mart, Nike, and Starbucks in their early days. In fact, this business is right now using the same powerful business secrets that launched these global giants.

“Here’s the story…

“This company has built a fantastic brand and is revolutionizing its industry. We project it will continue growing at a steady pace well into the next decade.

“You see, this stock IS A GREAT BUY AS WE SPEAK. More important, we believe it could turn into a ‘forever stock’… a stock like Coca-Cola or Apple or FedEx — a stock you and your family thank your lucky stars you found early on…

“And right now, it’s climbing — just like Wal-Mart did in the 1980s — so the earlier you get in, the better. Have a look…”

OK, now I’m starting to get a taste of deja vu … let’s see what the specific clues about this company are.

“That’s why the ONE AMERICAN BRAND recently made the revolutionary decision NOT to follow an industry practice of simply renting shelf space to the highest bidder. Instead, they’re getting the right products to the right customers by having regional managers decide which products get a test run in stores. Then, only if that product sells well and receives positive customer feedback, will the company make a long-term commitment to carry it…

“The ONE AMERICAN BRAND’S sales jumped 23% in 2004… In 2005, its sales jumped another 22%… In 2006 they jumped 19%. 18% in 2007… and 21% in 2008…

“In fact, for the last 5 fiscal years, the ONE AMERICAN BRAND POISED TO POWER INTO THE GLOBAL MAINSTREAM has produced average sales growth of more than 20%!”

Hmmm … yep, I think I know where this is going. A few more specific clues?

“they’re flat out more profitable than the traditional giants in the industry”

“Their ‘new way of doing things’ has quickly turned them into the world’s largest retailer of the FASTEST-GROWING SEGMENT in their industry.”

“… the ONE AMERICAN BRAND has a small number of stores out there – big cities like San Diego may have only one or two, for instance. And its only international sites so far are in Canada and Great Britain.”

“The ONE AMERICAN BRAND won Fast Company magazine’s ‘Customers First’ award”

“THE ONE AMERICAN BRAND was just named to Fortune’s ‘100 Best Companies to Work For’ for the 12th year in a row!”

OK, that’s got to be enough … right? Indeed, because it turns out that the “One American Brand” is the same exact company these folks have been teasing us about for years.

In fact, while they’re now teasing this as a stock that could double within a few years (it’s at $22.60 now), two years ago they were teasing the exact same stock, using an extremely similar ad, with the promise that it could triple again within a few years. Of course, back then shares were in the $40s.

I didn’t see this ad return to heavy rotation a few months ago, when the shares dipped all the way down to $8 and were perhaps a much more exciting bottom-fishing idea … but yes, they’re still teasing Whole Foods Markets (WFMI).

I first saw this ad back in December of 2006, and wrote about it back in March of 2007, when the New American Super Brand ad campaign was quite new and the Stock Gumshoe was still in diapers. At the time, the shares were pushing a 52-week low in the high-$40s, a price that WFMI shareholders would lust for today.

So this is clearly not a pick that the momentum traders or short term folks would have enjoyed much over the past two years — WFMI hit its high of about $80 way back in January of 2006, and it has been pretty steadily moving down ever since. That doesn’t mean that it’s necessarily a bad pick now of course — it is a dominant retailer in its niche, it is still growing, and some folks argue that they have gotten past the worst of their malaise.

WFMI’s problems were brought on by a few things — the stock price just plain got too high because of wild growth expectations, they had FTC and integration problems with the Wild Oats merger that seem now finally to be getting worked through, and now they have the unenviable position of being a brand that’s widely seen as luxurious and expensive at a time when upper-middle class Americans (their core constituency) are feeling poor and scared.

Whole Foods was a massive success in the early 2000s, with huge sales growth and a building boom in new stores as they pioneered the mass market organic and natural foods space and, in some ways, revolutionized grocery shopping, but now lots of folks think they might have overreached and tried to grow too fast.

Then again, organic and natural foods, and high quality produce, are still in much more abundance at Whole Foods than at most (certainly not all) of their supermarket competitors … and they do have an identifiable brand and niche, and (depending on how you look at it) no direct competitors. So it’s tough to say what the next few years will bring.

I’m a little shocked at the rapid recovery of Whole Foods’ share price — the stock fell off a cliff in November, when all companies that tied together the words “expensive” and “consumer” were sold en masse — but now, with the stock up almost 200% from those recent lows, the shares are trading at a forward estimated PE of 28 and analysts are downgrading them (Morgan Stanley and UBS both issued a downgrades last week, they like the price much better in the low teens … Morningstar thinks it’s fairly valued at $15 but a better buy at $7.50). I still like the company, but I continue to find it hard to love the stock at this price — every time I write about them they seem expensive to me, and that hasn’t yet changed.

Then again, I still shop there quite often, and it’s always full.

So what do you think? Will growth return for Whole Foods, or are they destined to be lapped by the improvements made by other grocers? Will their cash-burning international expansion ever take hold, or are they already saturated in their core markets? Will their new marketing campaigns manage to keep the wholesome image but lose the “expensive” aura, or will folks continue to refer to them as “Whole Wallet?”

And most importantly, is it a good investment here? Let us know what you think with a comment below. And if you’ve ever subscribed to any of the Motley Fool newsletters, click here to share your thoughts on those. Happy Investing!

The author will always disclose any direct long or short equity, debt or option position in any stocks written about as of the day of publication, and will not trade in any stocks mentioned for three days (72 hours) after publication. Full disclaimer is at the bottom of the page.

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1. Whole Foods is dead money…at best

   [Reply]

   Posted by Katie Catt | May 5, 2009, 11:08 am

2. good article to talk about…. let’s see, while I’m no expert on stocks yet, I am very aware of what’s happening in the world of collapsing economic times. and you can see te signs of whats happening ….precisely ….on the ground ,at places like supermarkets,…what are people buying,what are they not buying….etc.You can see it when you drive through silicon valley as I do, and see the big name high tech companies….their parking lots only half full… a few years ago they were full. you can even see it while driving to work at rush hour…. the traffic is much less than it used to be. etc etc.
   Las year, maybe 9 months ago,9 to 12 months,…I started seeing in the supermarkets….the PASTA shelves were being wiped out with buyers. and in the meat case….hamburger was being snatched up and not the expensive steaks…. .
   At trader joes,another good barometer, the pasta and spagetti sauce shelves…always depleted… This was NOT happening 2 years ago. Now…go take a look at this stock and you’ll see the impact there…AIPC….american italian pasta company…… soaring in the last year…even as they raise prices….
   People ARE spending less,saving more, and ANYTHING expensive has to be considered a luxury.

   I would much rather find a stock of a food company that specializesin ‘cheap/discount food….like the Grocery Outlet/(canned food outlet)…. or the giant warehouse food chains like Food Max…. if they have any such public offering…I dunno …
   People by nature, are like lemmings and sheeple…they just live by habit and dont even realize that paying 4 dollars a pound for a piece of fruit (at whole foods) is ….insane…. they think its normal. it’s not. its insane.
   Maybe when they lose their jobs next, they will start going to canned food outlet …. I place shopping at Whole Foods on the same level as buying a 52″ plasma t.v…..it was the thing to do 3 years ago. not now.

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   Alex Reply:
   May 5th, 2009 at 2:49 pm

   As long as people care about what they eat Whole Foods will do well.

   I gather neither Katie or sheeple actually every shop there. It’s called being a smart shopper. I can go into Whole Foods and stretch my dollar, and provide good food for my family. I’ve been able to pickup stuff on sale there, that is cheaper than GMO mass produced crap at the local grocer.

   If you keep thinking the way you are now. It’ll just continue to drive the cheap food, gmo industry.

   It’s certainly what’s been causing a lot of our problems.

   Lately I’ve just been shopping at farmer’s markets. Stretch your dollar, and help local farmers, and have healthy food. It’s a win-win all around.

   I think Whole Food will do just fine.

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   Katie Catt Reply:
   May 5th, 2009 at 5:30 pm

   I’m talking about the stock. I know people who way prefer Starbucs coffee to McDonald’s…wonderful for them…I prefer McDonald’s stock to Starbucs and I don’t think it’s financially healthy to have an emotional attachment to a stock, no matter how healthful their product is…Whole Food Markets is dead money for now.

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   Elissa Stein Reply:
   May 11th, 2009 at 5:06 pm

   How do you know that your local farmers aren’t using genetically modified seeds to grow your local produce?
   Monsanto has many lawsuits ( most that it wins) precisely because their seeds blow into the organic farmers fields close by, altering the organic ones and creating non-organic hybrids. Frankly, your opinion of genetically modified foods isn’t on point.
   Whole Foods had a great run up.The best thing about great run ups is taking profits off the table.

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   Posted by sheeple123jump | May 5, 2009, 12:12 pm

3. Yes, with the downturn of the economy of this country, anything with the words “Excusive”, “Luxury”, or “Rare”. Will have to be set asside for when the economy improves enough to the point when we can splurge once again on the the things we think we need. Anyone for a new Hummer?

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   Posted by James H Saito | May 5, 2009, 12:19 pm

4. Although I am not ready yet to buy the stock, I can comment from a consumer’s perspective as I have shopped at Whole Foods since the early nineties. I believe that they will continue to grow albeit with glitches, because they are pacing the growing societal concerns of serious health issues: Land, water, air and oceans are all poisoned. Food is contaminated, and food-makers continue to lie to consumers. The Medical Industry is rigged. The FDA is a joke. More and more people are realizing that they must take their own health issues into their own hands. People will continue to turn to WF to help them with this task. The fact that WF makes it into any kind of news…be it good or bad only helps them. The more that people know who they are and what they sell…the more customers they will get. Not to mention every time I go there to shop I am amazed at how many cash-poor people (and I do pay attention to this for my own curiosity) are figuring out how to still shop there. I believe this stems from the fact that if you eat healthy now, you will NOT have to pay a doctor (or for insurance premiums) for sickness later.

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   Raul Neumann Reply:
   May 5th, 2009 at 7:39 pm

   Cyndi is one of those that ” are sold the “safe the earth B.s. and environmental fanatics
   Whole foods is mainly for people who eat very small portions of ” grass” oe so called ” healthy food; and those that ( like all liberals) think it is an healthy environment; a few months ago in Chicago, they close one store for rodents running around the food
   Have a good day!!

   [Reply]

   Posted by Cindy Nevarez | May 5, 2009, 12:25 pm

5. Geez Katie, this chart looks pretty lively to Moi.

   http://finance.yahoo.com/q/ta?s=WFMI&t=1y&l=on&z=m&q=l&p=m50,m200,p&a=m26-12-9,r14,ss&c=

   I’m also ANA/DSHEA Certified & the amount of Wellness Health programs sprouting up all over Florida (& I’m told the West Coast too) is encouraging to a health nut guy like myself. This stock did get fire-bombed eralier; but the fire is out now, unless you’re waiting until they make an all-time high again.

   It c/b overbought for now, so either use a tight stop, or wait until the correction is complete, but I’m real confident that better days are coming for alternative health stocks.

   “We are what we eat, drink & inhale,” don’t ask me who stated that, just believe it’s true!

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   Katie Catt Reply:
   May 5th, 2009 at 8:30 pm

   Then by all means put your money where your emotions are

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   SageNot Reply:
   May 5th, 2009 at 9:20 pm

   Emotions, you’ve got t/b kidding young lady. How old are you?

   I spent the last 8yrs of my 19yr Wall St. career in commodities mgmt & as a swing trader. I’m 99% TA, NEVER, BUT NEVER emotional.

   Starbucks sucks everywhere except here in Brevard County, Fla. Not one Starbucks outlet has closed up, & the waistlines of many Brevardians are growing.

   High paying jobs, well to do retirees & of course 1,000’s of military, both active & inactive must love the product, I prefer Seattle’s best when I can get it.

   I live 10min. from Patrick AFB, who are constantly flying our troops in & out of the middle east.
   The Harris Corp., Northrup Grumman, Boeing, Lockheed, etc. have 1,000’s of highly paid employees residing all through our county.

   What recession I could say; but that w/b insensitive of me?

   Cheers as Travis would say!

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   Katie Catt Reply:
   May 5th, 2009 at 10:00 pm

   As you admit you live in an atypical part of the country…and your environment may influence your investment criteria

   

   Katie Catt Reply:
   May 5th, 2009 at 8:42 pm

   And is being a health nut skewing your investing dollars? The fact is people are looking for value not chic at the present time…just as starbucks has turned coffee into a commodity (as a consumer end product and not just at ICE) so too has Whole Food Mkts turned “organic produce” into a commodity. More and more chains are adding “locally grown” organics to their product line…and even cash strapped…downsize fearing, hybrid driving Yuppies are taking notice of that fact… moreover, the internet rants of a Whole Foods CEO, when they were trying to acquire a competitor hoisted a red flag for a large segmen f the investing public

   [Reply]

   Posted by SageNot | May 5, 2009, 12:28 pm

6. Shoe, Tim Fields (the prolific Tim Fields) is touting a stock for the smart energy grid that he says he would put ALL MY MONEY in this small company. The major player is Excelon in a Boulder, Colo. project. Do you know the company??

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   SageNot Reply:
   May 5th, 2009 at 9:09 pm

   Porter Stansberry’s PSIA has EXC since 2002. He’s up 164& incl. dividends & right now it’s his top winner.

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   Posted by Steven | May 5, 2009, 2:56 pm

7. Part of the reason for the recent run in price of WFMI and several other business is it has for some reason been impossible to short them with the error message “currently there are no shares of xxxx available for shorting”.

   I believe there is some market manipulation going on, where all the available shares are being tied up. Many of these companies are institution owned by around 75% or more, so it makes sense that this could easily be done.

   No shares available for shorting HOG, WFMI, WY, BWLD. for the last two weeks. This is from scottrade.

   [Reply]

   Posted by Tim | May 5, 2009, 3:13 pm

8. [...] ORIGINAL ARTICLE [...]

   Posted by Teaser Solved - “One American Brand” Could Double Within a Few Years | Stock Capitalist | May 5, 2009, 3:33 pm

9. By the 2/3 mark in the article I guessed it might be Whole Foods. But comparing it with Wal*Mart seems like a bit of a stretch – Wal*Mart is a company whose products anyone can afford. Whole Foods is outrageously expensive compared to the competition, and in my testing was no better tasting than products from a more typical upscale supermarket like Gelson’s in Los Angeles.

   In South Florida, local market chain Publix has a very nice “Greenwise” market as well as having a scattering of Greenwise products in their mainstream stores. They have a reputation for excellent quality and in my experience deliver on it.

   In Pittsburgh, hokily-named market chain Giant Eagle has “Market District” stores for “Foodies” and sells Nature’s Basket organic foods, most of which is of good quality, even though their store brand (unlike Publix’) is highly unreliable.

   In my own cooking, I have noticed that for some reason all markets seem to bone and skin their organic chicken more carefully than non-organic. I am not sure why this is, or whether it’s even related to organic per se, but I much prefer using organic chicken in my cooking for that reason. There seems to be little reason to use organic beef; I don’t notice much difference and in fact it seems harder to keep fresh than the non-organic stuff.

   Michael Pollan, who has made an interesting career out of studying our food system, says that Whole Foods products are better, or at least somewhat better, than their non-organic equivalents. But in the end he weighs in on the side of dealing directly with local farms and buying local produce instead of going with “Big Organic” and its systems.

   I’m unconvinced that Whole Foods is sufficiently differentiated from the competition to sustain the prices it charges. It seems to me the local competition is fighting back successfully, and this is probably why the stock is down so much.

   When Barack Obama, who made a $4 million book advance last year, still infamously complained about the price of Arugula at Whole Foods, that surely has to spell trouble for the brand.

   D

   [Reply]

   Posted by David Dennis | May 5, 2009, 9:41 pm

10. Wow. The political rants on the forum don’t get as heated as a Whole Foods discussion.

    [Reply]

    Posted by Derf | May 5, 2009, 10:15 pm

11. I bought long time ago and doubled my money. Too expensive to shop there now. Being on Social Security makes you buy local produce in season. Kroger has Lauras beef which is non GMO, organic and is cheaper than Whole Foods. Also, other stores such as Publix is going organic, maybe not in all locations, do not know. With all due respect Gumshoe, not all of us in the income bracket for Whole Foods now. Besides nearest location is 40 miles away. We are having a small garden this year, used to have one every year, became pretty well off and stopped. Nothing better than picking your own and freezing or canning.

    [Reply]

    

    StockGumshoe Reply:
    May 6th, 2009 at 10:08 am

    True enough, I suppose — and that’s part of the image that Whole Foods is fighting pretty aggressively right now.

    It’s much the same fight that Starbucks is in — they’re perceived as super expensive, but the Mcdonald’s McCafe around the corner from my house here has prices that are only about 5% lower than Starbucks. The challenge is keeping the “high quality” image while also marketing your stuff based on competitive pricing, and the marketers must come to work with headaches every morning.

    I find that Whole Foods’ produce and dairy stuff that I usually buy is actually the same price or cheaper than our local Safeway, but of course I’m always tempted to spend lots more anyway on the imported chocolate and fancy prepared food and organic wine, which is part of what they count on to keep their margins higher than the average grocer.

    [Reply]

    

    Katie Catt Reply:
    May 6th, 2009 at 2:53 pm

    YIKES!!!
    Mr Gumshoe, I am not and I suspect others who are making arguements against THE STOCK of Whole Foods Market are not, necessarily disputing what you say. However, lets compare THIS STOCK, with the stock of another company, that has sorta, kinda, a somewhat high-end image, to wit: Panera Bread. That stock hasn’t nosed-dived off it’s high like Whole foods has. Moreover, on April 29, 2009, Merill-Lynch downgraded WFMI to underweight and expects it to underperform all year. You might say …and I might agree that analysists ratings of stocks can be suspect, wrong or even corrupt…but none the less the STOCK, THE STOCK has underperformed (it may well have nothing to do with what you find in the retail outlet, remember there are more people who consider the stock than walk into the market) . If someone wants to buy a beaten down stock to buy and hold, with the expectation (rightly or wrongly) that it will someday return to past glories so be it…maybe LVS will to but I don’t want to gamble on it.
    http://news.moneycentral.msn.com/ticker/article.aspx?Feed=AP&Date=20090429&ID=9851488&Symbol=WFMI

    [Reply]

    

    StockGumshoe Reply:
    May 6th, 2009 at 3:20 pm

    I don’t necessarily disagree with you (though it amazes me that Whole Foods stirred up so much emotion from so many folks) — as I think I noted, I wouldn’t buy the stock right here, but that’s because I think it’s awfully expensive. WFMI is still priced as a stupendous growth stock, and I think it’s a long way from proving that it can regain that status in the near future.

    I’d personally put this in the “great company, overpriced stock” category right now … though I must say, if I’d been paying attention back when it bottomed around $8 I probably would have been tempted.

    Posted by Gadget man | May 5, 2009, 11:56 pm

12. organic, wholesome, no female hormones milk and food (where are all those manly men?) is worth any price.

    Even with bad economic times, what I put in my body comes FIRST! I expect Whole Foods stock to do well. Wish we had one in every town. I have to shop there when out on a trip…and love it!!!!

    [Reply]

    Posted by "Ginger" | May 6, 2009, 2:17 pm

13. I enjoyed the organic selections at WFMI. The food was expensive, but I guess the old adage: “You get what you pay for”, When buying up scale market food. My brief time to be within a few city blocks from the Whole Foods store was a real convienance. The stock may follow the niche it has carved out of the super market sector. WFMI may have some more pull-backs in price through this year to any interested investors. Best of Luck! Good Investing

    [Reply]

    Posted by Brian | May 9, 2009, 3:58 pm

14. Whole Foods? Nah. If I would hesitate shopping there, I certainly wouldn’t touch the stock. I much prefer Trader Joe’s (great quality and staff and lower prices than WFMI) but it’s not publicly traded

    [Reply]

    Posted by Truthpeeler | May 9, 2009, 4:24 pm

15. I bought WFMI at about $25, as it was sliding downhill (not enough research, irrational purchase), suffered through the downturn, and have been pleased to see it return to my purchase area. What to do now? After reading the annual report, and finding that their business practices seem to be as progressive as their food is organic, I’m hoping it keeps going up. As it pays no dividend, I will probably put in a stop-loss against the possibility of another drop, but hope it doesn’t trigger.

    [Reply]

    Posted by Sally G | May 10, 2009, 2:50 am