After languishing for decades as hippie food, organic food has gone mainstream.
Should you buy this powerful trend? Yes, if you can be patient…
The organic food movement is gaining steam, even if stock reports appear lackluster.
The demand for organic produce is expected to grow by more than 16% through 2020, notes TechSci Research. This growth will likely continue due to consumers’ desire for healthy lifestyle choices.
Furthermore, Organic Trade Association reports record-breaking organic food and produce sales in 2014, generating $39.1 billion in sales—an 11% increase over the year.
The outlook appears optimistic. If predictions hold true, it could mean long-term gains for investors.
Here are three organic food companies that should why deliver good results over the long run…
Whole Foods Markets (WFM)
Stock prices were nearly slashed in half, and some investors are a bit wary about purchasing.
Others, however, think Whole Foods is a bargain buy. Here’s why…
Whole Foods is still a strong brand and has a loyal following. And, most importantly, Whole Foods has a plan: To open stores that target the younger, less affluent shoppers.
The launch will occur later in 2016. Stores will be named “365” and be open every day of the year. The company hopes these less expensive alternatives will attract consumers from some of their competitors.
Grocery stores such as Walmart (WMT) and Kroger (KR) are making more space in the produce aisles for organic produce and prices are cheaper. Whole Foods hopes to overcome this consumer obstacle with 365.
Although some experts say that Whole Foods Markets’ glory days are over, I’m not convinced. I believe they may be experiencing a bump in the road, but will gain traction as gains in the organic food market continue to climb.
Why? There’s no reason to expect the organic trend will go away anytime soon. I expect Whole Foods to emerge stronger with the launch of 365. This stock is a particularly good buy for millennials ready to invest for the long term.
The next stock is a common name among those with a growing appetite for natural and organic products…
Hain Celestial Group (HAIN)
The company has historically reported good numbers: double-digit growth in sales for 20 quarters. Recently, however, the company’s Q1 revenue increase was just 9%.
That’s no reason to abandon this stock altogether.
Hain is a master of growth initiatives. The company reported Q1 2015 revenue at $631.3 million with a projected Q1 2016 revenue of $687.2 million.
Although there were some disappointing results, the salmonella nut-butter recall of 2014 continues to affect Hain’s bottom line. The company lost approximately $5 million in private label business due to the recall.
Whole Foods, Trader Joe’s, Kroger, and Safeway private labels were among those adversely affected.
While Hain initially lost business, some retailers have returned. Others are expected to follow suit, but it may take a quarter or two to fully recover.
Hain, despite its setbacks, is a company worth noting. Its forward-looking growth initiatives make this stock an appealing investment for the long-term investor.
Our last stock is a heavy hitter in the natural and organic food world…
United Natural Foods (UNFI)
- Forbes magazine ranked UNI as one of “America’s Best Managed Companies” in 2014.
- Food Logistics Magazine ranks UNI as a “Too 20 Green Provider” in 2013.
- Fortune magazine ranks UNI as one of the “Most Admired American Companies” in 2012.
UNFI is one of the best organic food companies for long-term results.
Although analysts overestimated earnings of this stock for fiscal year 2015, UNFI expects bigger gains next year. In fact, the company is preparing for new growth as it expands its market into perishable goods.
In a press release dated November 2, the company reportedly entered a new primary distribution agreement with Whole Foods, extending the agreement through 2025. That’s good news for Whole Foods. Furthermore, UNFI added warehouse capacity for customers, which should improve growth over the next two or three years.
The reviews are mixed for this stock, with most analysts rating it a HOLD and others ranking it a STRONG BUY.
Organic sales are beginning to see growth, and there’s no reason to believe this growth will be stunted any time soon. That’s why United Natural Foods is a BUY.
Avoid a knee-jerk reaction when it comes to organic food/product stock prices. Think long term, instead.
The growing consumer base for organic products and healthier life choices indicate that the demand will just get stronger over time.
In fact, the Organic Trade Association wrote in a press release that individuals from all regions, ethnic backgrounds, and socioeconomic statuses are turning to organic food and organic food products.
With organic foods accounting for 5% of the food market, now is a good time to make an investment.
This post originally appeared in mainstreetinvestor.com.
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