Nobody Knows Nothing
10 Stocks to Buy and Hold Forever
WhiteWave Foods Inc (WWAV)
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Nobody knows nothing.
Yes, I know that's not grammatically correct, just as Elon Musk knew it was not grammatically correct to title a recent blog post, "All Our Patent Are Belong To You" (You can see it here.)
It's a matter of style, which, ideally, carries a message.
Today's message? It's wrapped around the idea that a lot of what we believe is just plain wrong. And it has always been so.
For example ...
500 years ago, people believed the Earth was the center of our universe. Now we know that the Sun is the center of our solar system.
425 years ago, people believed that heavier bodies fall faster than lighter ones. Now we know that density, not weight, affects falling speed.
250 years ago, people believed that whales were fish. Now we know they're mammals.
185 years ago, people believed that the shape of your skull influenced your behavior (phrenology). Now we know better.
130 years ago, people believed that light traveled through the medium of luminiferous ether. Now we know that there is no such thing.
100 years ago, people believed that the continents were fixed in place. Now we know that because of plate tectonics, they're continually shifting.
70 years ago, people believed that pounding an ice pick through the eye's orbit to disconnect the prefrontal cortex (lobotomy) would cure behavioral problems. Now we know better.
60 years ago, people believed that ulcers were caused by stress. Now we know they're caused by the bacteria H. pylori.
Just 10 years ago, best practices on detecting and treating both prostate cancer and breast cancer were different than they are today.
And right around the corner, I predict a major turnaround in the medical profession regarding opioids, whose over-prescription has created a surge in heroin addiction.
The point is simple. Much of what we believe is wrong-and it has always been so.
But the sooner we discover new truths, the better-and the best way to do this is keep your mind open to any evidence that challenges your current beliefs.
It's difficult, but it can be liberating.
And sometimes, it can help you find great investments.
Looking back over some of Cabot's big winners over the decades, we find that many of these companies succeeded in a big way by doing something new, something that many people said couldn't be done.
Off the top of my head, these include:
* Amazon (AMZN)
* Corning (GLW)
* eBay (EBAY)
* Iomega (acquired by EMC (EMC))
* Netflix (NFLX) Qualcomm (QCOM)
* Summit Technology (acquired by Alcon, which was bought by Novartis (NVS))
* and Tesla Motors (TSLA)
And now it's time for one more potential candidate, in this week's installment of
10 Stocks to Buy and Hold Forever
The goal, remember, is not to identify stocks that can give you a decent long-term return, like Johnson & Johnson (JNJ) and DuPont (DD). You can hold those forever, but they won't make you rich.
I want to identify the next Amazon.com (AMZN), the next Apple (AAPL), the next Google (GOOG) and the next Keurig Green Mountain (GMCR).
To recap, the key attributes I look for are these:
1. A product or service or business model that is revolutionary.
2. A mass market.
3. A company that's still small enough to grow rapidly.
4. A company that is not respected-perhaps not even known-by the majority.
And last but not least, a stock that's trending up, indicating that investors' perceptions of the company are improving. This is important because perceptions are always at least as important as reality.
Which brings me to today's stock, number seven in the series, "10 Stocks to Buy and Hold Forever."
WhiteWave Foods (WWAV)
On one hand, there's nothing revolutionary about WhiteWave; as the largest organic food producer in North America, the company makes and markets foods under the brands Silk, Horizon Organic, Alpro, Land O' Lakes and Earthbound Farm.
On the other hand, if consumers continue to move away from animal foods and toward plant-based foods, this company could develop into the leading voice of a real revolution-because this is a real mass market. We all eat food.
How possible such a revolution is is hard to say. The culture of beef and burgers is well entrenched in this country. Yet every day more and more people are switching to an animal-free diet (or ate least eating less meat), and the trend has been very profitable for WhiteWave.
In fact, I joined the movement four years ago, after a reader recommended the book The China Study by T. Colin Campbell. I read it, and I changed.
But this isn't about me. It's about WhiteWave.
The company was spun off from food giant Dean Foods on October 2012, because of its superior growth characteristics.
Looking at financials broken out since 2007, I see that the company has demonstrated regular revenue growth averaging 13% per year, which is good for a food company.
Today, WhiteWave is a $3 billion company, thanks to the acquisition of Earthbound Farm in December. The addition of that firm resulted in revenue growth of 36% in the latest quarter, and earnings growth of 38%.
Also impressive is the company's new China joint venture, with Mengniu Dairy Company, to manufacture and distribute products in China.
In sum, while the future is unknown, the trends are very positive, and the potential is enormous. In fact, I think very few people have truly considered how long this trend can run and how far it could go.
Optimistically, you might call it the anti-Coke trend. When Coca-Cola came out, no one could imagine the sugary-soda culture it would lead to-a culture that is finally in retreat.
So imagine how far WhiteWave might go in a century if the trend to plant-based food goes as far as the trend to soft drinks did!
As to the chart, the message is positive.
WWAV came public at 17 in October 2012 (just before the market bottom) and it's up 88%. The stock hit 32 at the end of May and it's been building a base since then, trading nicely between 32 and 33.
In the meantime, the stock's 50-day moving average is nearing 30.
If you like the story, you could jump in now.
Or you could wait for a pullback to the 50-day moving average, or a breakout to new highs.
But best of all would be to take a no-risk subscription to Cabot Top Ten Trader, which is where Mike Cintolo originally recommended WWAV.
Get more details here.
Yours in pursuit of wisdom and wealth,
Chief Analyst, Cabot Stock of the Month
and Publisher, Cabot Wealth Advisory