Organic Inflation Could Mean Profits

I’m convinced of price inflation in another important market sector. The price of food is going to go up.

It’s the beginning of another investment theme that I’m really getting excited about. Organic foods are slowly but surely taking over the marketplace. If you ask anyone whether they would like to eat an untouched, organically grown apple, instead of one that’s been genetically modified, virtually everyone chooses the real deal.

The big question is, how can we profit from this trend going forward? Not surprisingly, this is the difficult part.

One company that comes to mind is Whole Foods Market Inc. (NYSE/WFMI). Do yourself a favor and pull up a long-term stock chart of this company. Its success has been truly amazing. Whole Foods was founded in 1978 in Texas, and it operates a chain of natural and organic food stores. As of July this year, this retailer operated some 170 stores in the United States, Canada, and the United Kingdom.

Since the year 2000, the stock has appreciated about sevenfold and looks to have strong momentum on the stock market right now. Of course, this growth hasn’t escaped the view of the investment community, and the stock is expensively priced. But it is likely to remain expensively priced, as Street analysts see the company generating 20% in yearly earnings growth for the next five years.

In late February of this year, I did find a micro-cap company dealing with organic products that was generating some impressive growth. The company was called Spectrum Organic Products Inc. (OTCBB/SPOP). At the time, the stock was trading for a measly $0.53 per share. It did appreciate to over $0.70 per share; then a large company decided it would like to purchase the company. It must have also recognized the opportunity.

We’ve talked about the alternative energy investment theme. That one’s hot. We’ve talked about the pet care and eye care industries. Not so sexy, but they are making a great deal of money for investors. Now, a new investment theme is organics. I’m on the case and will report to you on attractive opportunities as they arise.