WFMI missed it's earnings number yesterday and today is taking gas (down over 12% as I write this post).

WFMI is more of a "Builder Portfolio" type stock, about 2.4% yield, but good div growth.  It is trading at a steep discount to M* fair value (5 stars). 

I took a very small nibble today.  I have visited several Whole Foods Markets and they really offer a different type of shopping experience.  Kind of reminds me of a cross between a Health Food Store, Restaurant, and Super Market, all rolled into one.  IMO, the shoppers seem to be very loyal customers.

WFMI is not without problems but seems to me to have most of the difficulties priced in at under $30.  I'm interested in opinions. 

Regards,
Russ

Russ, I agree that WFM customers are loyal. I occasionally go there and they always seem both busy, and very clean.  I haven't looked at their financials, but am surprised they offer a good dividend.

However, given that I do the bulk of my investing in taxable accounts and the end of the 15% div. tax rate is in sight, I think I'm going to be putting most of my future taxable contributions into municipal bonds. 

Greg
 

Russ, I've been in a WFMI store once or twice, but it appears to me that many competitors (HEB in Texas) have started working their way into WFMI's market. It kind of reminds me of MCD trying to take the premium coffee market  from Starbucks. 

When a no moat or narrow moat company creates a market, they also create predators  in the form of wide moat companies. I normally like to bet on the wide moats.

helmut 

WFMI used to be one of my largest holdings during its rapid growth phase of the mid to late 90's....but when the jets started to cool, I checked out.

When nobody else advertised 'Range Roving Chickens' or 'Organic Spinich...grown without pesticides or artificial furtilizer', they were the only retailer with a full product line. But now with retailers like Safeway, Kroger and Albertsons....and even WalMart super stores getting into the 'Organic' market, WFMI has begun to face their first real competetion for those mainstream shoppers wishing to add 'Organic' to their shopping list. WFMI's problem has been, and will continue to be, price. The 'Green' and 'Environmentally friendly' community must manage their household budgets just like everybody else. And when you can get 25% more of the same 'organics' at a large chain and you only have so much $$ to spend on groceries.......

 Now, I think WFMI, like other specialty or 'niche' retail stores will keep the faithfull regardless of price (well, up to a point), and this should keep WFMI in the black. But I suspect those 30% annual growth years are behind us.

BruceM

Helmut, I agree, wide moats offer the best chance of success for investors.  However, really good deals (5 stars) on wide moat stocks are few and far between, and in some industries wide moats are scarce or non existent.  My general rule is that individual stocks should have at least a narrow moat or I pass.  Out of 47 stocks in my portfolio, I have made only one exception to this rule. 

Individual stocks make up the bulk of my portfolio.  Investors, who are only supplementing their portfolio with dividend paying stocks, would IMO, benefit by choosing only wide moat stocks, as you advocate. 

Bruce, I agree with your comments.  WFMI's period of super high growth (30%/yr)  is likely over.  However, WFMI is still growing  2 to 3 times faster than "normal" supermarkets, and IMO, deserves a price premium.  WFMI current PEG ratio is 1.1 per M* which indicates it is not over priced, assuming it's current growth rate doesn't go down the tubes. 

My observation is that WFMI's core customers are somewhat fanatical and will pay premium prices for perceived quality.  There is a certain amount of trust involved when buying organic food and WFMI has that trust.  I'm not sure a regular supermarket will ever achieve the same level of consumer confidence. 

You were very astute to have invested in WFMI during their growth years and even more astute to realize when the party was over.  Congratulations.

Regards,
Russ

I purchased 200 shares of Whole Foods at $48.85 back in 2006.  I've potentially lost quite a bit of money and wonder if I should hang on or cut my losses.  Rather late in getting to this question.  Thought things would turn around.  Now I see Morningstar has the fair value under review. 

I purchased 200 shares of Whole Foods at $48.85 back in 2006.  I've potentially lost quite a bit of money and wonder if I should hang on or cut my losses.  Rather late in getting to this question.  Thought things would turn around.  Now I see Morningstar has the fair value under review. 

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I'd think about buying now, not selling. The price is finally down to where the P/E makes some sense. 

Now if only the food prices would come down like that! 

I was mistaken when I said in my original post, "WFMI is not without problems but seems to me to have most of the difficulties priced in at under $30."

Apparently WFMI's problems are continuing.  Here is what they plan to do to turn things around:

-- The Company is reducing the number of stores expected to open in fiscal year 2009 to approximately 15 and has cut all discretionary capital expenditure budgets not related to new stores by 50%. The Company is committed to actively managing its capital expenditures and does not intend to access the capital markets for additional funding in the foreseeable future;

-- the Company has already implemented certain cost containment measures for the remainder of this fiscal year and expects G&A expenses of approximately 3.2% of sales in fiscal year 2009; and

-- the Company is suspending its quarterly cash dividend for the
       foreseeable future.

Fortunately, WFMI "was" a very small position in my portfolio. 

Win some, lose some.  

Regards,
Russ

. . .  WFMI "was" a very small position in my portfolio. 

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I like your style, Russ.  You appear to invest in companies for specific reasons and, if something changes or the company disappoints, you send 'em to the sidelines.

Regards.

Cliff