By Timothy Lutts, Chief Analyst, Cabot Stock of the Month
From Cabot Wealth Advisory 8/18/14 Sign up for Cabot Wealth Advisory—it's free!
I previously recommend WhiteWave Foods (WWAV) here on April 28, when it was trading at 27. Now it’s at 33, having just broken out to a new high.
And that’s important because with market leadership narrowing, those stocks moving to new highs (but not on parabolic paths) are the ones you want to be in.
WhiteWave, for the record, was spun off from food giant Dean Foods in October of 2012.
Dean Foods kept its traditional milk, cream and ice cream business while WhiteWave got the faster-growing non-dairy businesses.
Today, WhiteWave produces a variety of popular organic food and drinks, including Silk, Land O’Lakes, Earthbound Farm (which it bought in January) and Horizon Organic.
Revenues were $2.5 billion in 2013, up 11% from the year before, but the Earthbound Farm acquisition should see earnings climb at least 34% this year.
And the stock’s PE is now 38. Not bad.
I like the trend toward organic food in general, as do growing numbers of Americans.
And I like WWAV’s chart.
The trend is clear.
And the news is good.
In fact, just two weeks ago, the company released its second-quarter report, and handily beat analysts’ estimates.
Gregg Engles, chairman and CEO, reported strong growth in all four segments: Plant-based Foods and Beverages, Coffee Creamers and Beverages, Premium Dairy and Organic Greens.
The report sparked a gap up from 30 to 33.
Last week the stock worked on consolidating that gain.
And last Friday it broke out to a new closing high!
(Also—and this gets a little technical—the stock also sports a new RP peak, meaning it’s performing better than the market. Pretty good for a food stock with a solid core business.)
If you’ve owned WWAV since my original recommendation, congratulations. You should hang on to most of it, but you should consider taking a little off the table here. As Tom Garrity of Cabot Small-Cap Confidential says, “Pay yourself first.”
And if you didn’t buy it back when it was 27, you could buy it now.
But even better would be to go to the source of the original recommendation, Mike Cintolo’s Cabot Top Ten Trader.
For every stock recommended in Cabot Top Ten Trader, Mike gives a precise buy range, as well as a stop loss for controlling risk. So while you might get lucky doing it on your own, your odds are better if you follow Mike. Details here.
By Timothy Lutts, Chief Analyst, Cabot Stock of the Month
From Cabot Wealth Advisory 6/30/14 Sign up for Cabot Wealth Advisory—it's free!
On one hand, there’s nothing revolutionary about WhiteWave (WWAV); 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.
From Cabot Wealth Advisory 4/28/14 Sign up for Cabot Wealth Advisory—it's free!
The stock market's past six weeks have been very interesting, featuring a breakdown of momentum in formerly hot growth stocks, amid a background of resilient performance by the market as a whole, particularly large dividend-paying stocks like Apple.
Most interesting of all has been the strength in commodities, from oil and gas to fertilizer, coffee, soybeans and nickel.
I could try to explain this shift in leadership, mentioning the economic cycle, interest rates, housing, the weather, international politics and more, but it wouldn’t really help. The fact is commodity stocks are strengthening, so it’s time to explore opportunities there.
My suggestion today is a commodity stock with a growth twist.
It’s WhiteWave (WWAV), a food company that was spun off from food giant Dean Foods in October of 2012, and has done just fine since.
Here’s what Mike Cintolo wrote about it in Cabot Top Ten Trader back in late March.
“While every investor loves a company that’s set to quadruple earnings during the next year or two, most big investors also love to hunt for small companies with years of relatively consistent, foreseeable growth ahead. Retail stocks often fill that criteria, and that’s why WhiteWave Foods is making its inaugural appearance in Top Ten. Like many in-favor food companies, WhiteWave produces a variety of popular organic food and drinks, including Silk, Land O’Lakes, Earthbound Farm (which it bought in January in a deal that will boost earnings this year) and Horizon Organic. With revenues approaching $3 billion, WhiteWave’s growth is moderate and steady. The long-term trend toward healthy eating should remain a wind at the company’s back—just 26% of U.S. households buy plant-based beverages like Silk, for instance, but that’s up from 16% in 2009. And organic packaged salad is now 23% of the total salad category, up from 14% in 2009. There’s nothing revolutionary here, but WhiteWave is a firm with leading organic brands and top-notch distribution in an industry that’s sure to grow in the years ahead. The valuation is elevated, but big investors (440 funds now own shares) are willing to pay up.”
That was a month ago, when the stock was trading at 28. Since then, it’s dipped to 26, bounced right back to 28, and is still in that range today, despite the market's weakness. The odds are very good that a blast to new highs—through 30—is only a matter of time.
So, you could just jump in and buy some here. Trouble is, you’d then be on your own, and it’s unlikely that I’ll write about it again for quite some time.
The prudent course, therefore, would be to take a trial subscription to Cabot Top Ten Trader, so you can get Mike’s regular weekly updates on the stock. This could be the beginning of a very long and profitable run, and if it is, you can count on Mike to keep you in the stock.
But if it doesn’t work out—maybe the commodity surge proves short-lived or maybe the entire market heads south for the summer—you can count on Mike to get you out with minimal losses. Click here for more information.
|WhiteWave Foods (WWAV)
1225 Seventeenth Street, Suite 1000
Denver, CO 80202
|Index Membership: N/A
Sector: Consumer Goods
Industry: Food - Major Diversified
Full Time Employees: 3,900
6/30/14 WhiteWave (WWAV): Could develop into the leading voice of a revolution
4/28/14 WhiteWave (WWAV): Foreseeable growth ahead