Profiting from Green Lifestyle Trends: 2 Organic Plays

...If you follow the stock market, you already know the stock of Whole Foods Market (WFMI) has been a big winner due to this trend for much of this decade. In fact, in recent years, sales of organic products overall were rising 25% a month (!) until the economic turmoil of last autumn. Naturally, because organics are generally pricier, that rate of growth dropped. Yet while pundits expected the recession to be the death knell of the widespread move to organics, it hasn’t been.

The organic and natural foods market segment is still seeing growth of 1% to 5% a month, compared to 0.4% annual growth for groceries at large. What appears to have happened is that consumers haven’t cut back heavily on organic groceries, although they have shifted more to bulk organics. Instead, they have cut back more on restaurant dining.

One of the big winners of the move toward organic products I’ve discussed before is Green Mountain Coffee Roasters (GMCR). The Vermont company has a large mix of organic and fair trade coffee in its offerings. The beans are sold through outlets like Costco (COST), while McDonald’s (MCD) serves its coffee in the restaurant’s New England and Hudson Valley outlets.

Green Mountain also produces the Keurig coffee brewer and its popular single-serve K-cups. The Keurig makers have just begun distribution through Wal-Mart (WMT), while high-end coffee-maker company Cuisinart has recently inked a deal to market its own version of Keurig brewers.

We bought UNFI on May 15 at 25. Shares then were sold down to 22 by a market expecting poor earnings due to the recession, but as we told subscribers in a May 28 update, “we expect UNFI to show a good quarter.”

On June 2, it reported earnings that beat Wall Street estimates thanks to stronger-than-expected consumer buying and lower costs. Shares rallied to 26 on strong volume, where it is now building a base for a further move higher.

Disclosure: Long UNFI, WFMI