February 25, 2018 09:01 pm CST
Warren Buffett Can't Stop Talking About THIS Stock
By Jeff Siegel, Wealth Daily

Tree-huggers were up in arms last week after Warren Buffett blasted Whole Foods Market (NASDAQ: WFM).

As reported in Bloomberg, in response to questions about holding investments in companies that make foods high in sugar while consumers' diets shift toward healthier options, Buffett said, “I don't see smiles on the faces of people at Whole Foods.”

As if Uncle Warren's ever stepped inside a Whole Foods.

The notorious junk-food lover was probably just trying to be funny, yet a gaggle of over-sensitive Internet trolls turned this innocuous comment into something much bigger than it actually was.

Of course, given that Whole Foods had just announced earnings that fell below expectations, Buffett's remarks likely stung a bit more than they should have.

A New Strategy

I've long been a fan of Whole Foods — not just as an investor, but as a consumer, too.

Although most of my food comes directly from the farm, I still visit my local Whole Foods at least once a week to pick up things like cereal, rice, and produce that's not grown locally. And I can assure you, there are always plenty of smiling faces.

Customers are smiling because the store has consistently supplied their demands for more than 20 years, and management is smiling because the store makes a boatload of cash. The only Whole Foods lovers that haven't been smiling recently are shareholders.

After its most recent earnings release, 17 analysts cut their price targets. The stock fell more than 10%, and downward pressure has remained.


One of the primary concerns is that the market Whole Foods pioneered has been embraced by mainstream competition. Big box stores and conventional supermarkets are in fact creating a new level of competition that for decades never existed for Whole Foods.

So in an effort to counter some of that competition, Whole Foods is now looking to build out a new format designed to lure both the cost-conscious and millennials. Here's how co-CEO Walter Robb described it:

Today, we are excited to announce the launch of a new, uniquely-branded store concept unlike anything that currently exists in the marketplace. Offering our industry-leading standards at value prices, this new format will feature a modern, streamlined design, innovative technology and a curated selection. It will deliver a convenient, transparent, and valued-oriented experience geared toward millennial shoppers, while appealing to anyone looking for high-quality fresh food at great prices.

In theory, I actually like this idea. In fact, I've often wondered why Whole Foods had never branched out in this direction before. I've long believed Whole Foods would do quite well with its own branded kiosks in airports, colleges, and business centers, too.

Either way, one thing I know for certain is that every time the market turns on Whole Foods, the stock eventually comes back stronger. The same thing's going to happen again.

A Deteriorating Dynasty?

Despite not hitting estimates, the company still delivered a 10% increase in Q2 sales to a record $3.6 billion, and EPS moved up 14%. Year-to-date, total sales have increased by 10% to $8.3 billion, with comparable store sales increasing by 4.2%.

These are not the results of a deteriorating dynasty, as some would have you believe.

Sure, management has its work cut out for it. Competition is not going to let up, and Whole Foods is going to have to get creative to stay ahead of the curve.

But honestly, that's what the company does best. And as I've seen plenty of times in the past, once the smoke clears, Whole Foods tends to be an excellent stock to pick up on this kind of weakness.

So don't count this one out. Because just as sure as Warren Buffett will continue to inhale his Cokes, Cheetos, and Utz Potato Stix, Whole Foods will once again prove its doubters wrong.

To a new way of life and a new generation of wealth...

Jeff Siegel Signature

Jeff Siegel

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