“How to Double Your Money on ‘The Next Whole Foods'”

Sniffing out the rapidly expanding natural food chain touted by Keith Fitz-Gerald

By Travis Johnson, Stock Gumshoe, April 9, 2013

Today’s tease comes in for the Money Map Report, in some articles where they hint around about the best way to double your money on the stock they think can be the “Next Whole Foods.” The pick is by Keith Fitz-Gerald, but We get a bit of an introduction from Steve Christ in a free article lead-in to the ad:

“There’s an incredible new trend brewing right now. And it’s incredibly profitable too…

“… this particular industry has grown from “only” $3.6 billion a year in 1997 to more than $31.5 billion today.

“That’s especially impressive when you consider that this growth – all 775% of it – occurred during the greatest sustained economic downturn since the Great Depression.

“You see, the industry – and a company that just went public in July – is set up to benefit from an extreme cultural shift that’s gaining speed and strength every day.

“I’m talking about the movement towards ‘real’ food-not ‘fake.'”

And this …

“Whole Foods has plans to nearly triple … to about 1,000 stores by moving into suburban and other underserved markets.

“According to Money Morning Chief Investment Strategist Keith Fitz-Gerald, that’s just a sign of what’s to come in the organic food industry.

“‘People are becoming acutely aware of what they put in their bodies’ Keith said, ‘and they don’t want it to be genetically modified, full of high-fructose corn syrup, or created with chemicals, herbicides, preservatives, and growth hormones.'”

Well … not everyone is becoming acutely aware. Coca Cola still sells more than one serving of their products (mostly Coke and Diet Coke) per person, per day in the United States, and we are notoriously eager to try every new processed convenience food — from the frozen peanut butter and jelly sandwich (the absurd Uncrustables are 15 years old this year!) to the pressurized can of pancake batter.

But yes, I agree this is a trend that’s not likely to crest anytime soon — more organic, more natural, hopefully less processed (though I’m a sucker for organic and natural convenience foods myself).

So how do we play that trend as an investment? Well, there’s always Whole Foods (WFM), of course, a stock I like but have never owned (I can’t seem to get the timing right on that one — when it has dipped or seen lower prices, I wasn’t paying attention to it … though it’s actually looking pretty good to me again lately, I’m in the process of taking a closer look).

But Whole Foods is already pretty big. Not huge — larger grocery chains like Kroger and Supervalu have close to 2,500 stores each, Safeway comes in close at about 1,500, Whole Foods has about 350 stores, with ambitions to continue increasing that store count by 5-10% per year and an assertion that they can easily reach 1,000 stores in the United States without saturating the market.

And Whole Foods has been a remarkable growth engine for investors for many years — since well before it was touted as the “New American Super Brand” by the Motley Fool brothers in the early days of Stock Gumshoe (that was six years ago — though they still own it and tease it now and again), but when you’ve got a big growth company that looks a little bit expensive, with fears that the growth may be petering out or cresting, you can bet that someone will try to sell you on the idea that there’s an up-and-comer ready to eat their lunch.

So that’s what we’ve got today — Keith Fitz-Gerald thinks he’s found the “next Whole Foods.” Here’s how he hints around about this one in the attempt to get you to subscribe to the Money Map Report for the full story:

“As Whole Foods becomes referred to as ‘Whole Paychecks’ among more and more shoppers, consumers will look elsewhere for cheaper organic products.

“That’s where this company has a competitive advantage with its much smaller stores. As a result, they are able to offer prices 8%-10% lower than Whole Foods.

“What’s more, the company offers entirely organic and natural products, whereas Whole Foods offers a combination of organic and non-organic products.

“You may not think this is a big deal, but there’s a hidden benefit since it means shoppers don’t have to waste their time reading labels. They can rest assured that every last item has been pre-screened before it hits the shelves.

“… here’s where the payoff really is for investors: the company used the $54 million it raised in its share offering to pay off debt and can now fund its expansion with a clean slate. Very few companies have this luxury….

“… the company plans to expand its store count by 20% a year.

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“And with just 60 stores currently in operation and the prospect of 1,000 stores in the future, that’s practically like buying Whole Foods at the beginning of its run.

“Since the company’s stock began trading publicly in July 2012, shares have gained 34.36%. Says Keith: ‘I don’t expect the price to stay so low for long.'”

And the note also adds that this pick was recommended in the Money Map Report in their December issue … which would mean they’re already doing pretty well. The pick being teased is Natural Grocers by Vitamin Cottage (NGVC), and the shares were mostly around $20 in December and they’ve recently been on a spike up to around $24 — though this is a new and pretty thinly-traded small stock, with a market cap of only about $500 million, so it’s been a very bumpy ride since the IPO, with quite a few weeks when the stock was up or down 10%.

The stock is not obviously cheap, and it’s pretty heavily shorted, but it’s not wildly out of line with