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07/02/2004 12:00 am EST
I'm always intrigued when two of the best in the advisory business are strong supporters of the same stock. In this case, options expert Bernie Schaeffer and economist Mark Skousen are both bullish on the outlook for Whole Foods. Here are their reviews.
"We continue to see great news on Whole
Foods Markets (WFMI NASDAQ), the fastest growing natural/organic
grocery stores in the world," says Mark Skousen, editor of Forecasts & Strategies
. "The price of the stock is catching
up with the growth of the company. The stock has jumped 30% since we recommended
it four months ago. During this same time, the average stock fell 3%,
and other traditional grocery stores have gone nowhere. Whole Foods creates markets
that are a celebration of food and gourmet dining: bright, well staffed,
and seductive. The new Whole Foods 59,000 square foot store at Columbus Circle
in Manhattan is a case in point. Many pundits said the firm was taking a big
risk putting a large grocery store in the middle of New York City where parking
is expensive. But so far it’s worked, as store sales are up sharply and the
staff has been increased by 60%.
Whole Foods, already a member of the
NASDAQ 100 will probably be joining the prestigious S&P 500 Index in the next year.
When it does, the stock will skyrocket again as institutional investors begin loading up. Meanwhile, I had dinner last
month with CEO John Mackey, who was on a tour of his stores (now over 150 throughout
the US, Canada, and Britain). Whole Foods is planning to build the world’s
largest grocery store in Austin, Texas, his home town. He didn’t give me any
specifics on the company’s future, but said, ‘Don’t sell the stock, it’s going a
lot higher.’ So far he’s been right. Whole Foods remains one of our favorite
Adds Bernie Schaeffer, in his The Option Advisor , "Whole Foods reported earnings last month of 54 cents per share, besting the Street estimate of 50 cents per share. Additionally, the stock has rallied higher along the support of its ascending ten-week and 20-week moving averages since July 2003, setting a new all-time high in recent trading. Despite this show of strength, investors remain unconvinced. The number of WFMI shares sold short rose by more than 16% over the past month, arriving at nearly six times the stock's average daily trading volume. An unwinding of these bearish bets could easily provide support for the stock in the form of a covering rally. Wall Street also has its doubts, as only 23% of the covering analysts rate it a ‘buy,’ leaving ample room for future upgrades that could provide additional support for the equity. We’d add that for those familiar with options strategies, that we recommend selling the Whole Foods August 85 put, which is a bullish options play on the underlying stock."
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