3 food plays on diet and health

Concerns about weight loss, diet, food, sugar etc. is inevitably going to become a much more important part of the American lifestyle.

My associates and I have therefore begun a research effort to try to nail down the strongest beneficiaries of this trend. Here's a look at Whole Food Market (WFM), United Natural Foods (UNFI) and The Fresh Market Inc. (TFM).

Whole Food Market� is a long-time favorite of mine. This exceptionally well-managed organic foods grocer is the largest of its kind in the United States.

Over the past decade it has grown at about a 15 percent annual rate, and we expect that rate to accelerate well past 20 percent over the next five years.
This is hardly a cheap stock, trading at above 30 times forward earnings. But just consider the comparison: its market cap is about $17 billion.

The company is not the largest grocer in America, and in fact its share of countrywide food sales is a very small percentage indeed. In other words, there�s room for rapid and long-term growth.

Smaller companies that also sell health products include United Natural Foods which is actually a distributor of organic and healthy foodstuffs.

It is one of only two such companies in the United States, and though its P/E is relatively high at about 25, with a market cap of only $2.5 billion or so, there�s again clearly lots of room for rapid and sustained growth.

A third stock would be a fairly recently listed, relatively small food retailer: The Fresh Market. Here growth has been spectacular since the company was listed in 2010, resulting in it tripling in size by 2012.

Undoubtedly that kind of rate is not going to be sustainable. But for this relatively small company with a market cap of $2.6 billion, we can easily see annual growth topping 25 percent over the next five years.

We think all three of the above stocks are among the first to get aboard what we believe will be a new and powerful trend expected to permeate American society.



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