Cramer Pits Whole Foods Market Vs. The Fresh Market
After Wall Street suffered another rough session on Monday, “Mad Money” host Jim Cramer recommended investors gravitate toward only the best stocks.
“In an environment that’s as difficult as this one, you only want to own the names in which you have the most conviction,” Cramer said. “It’s at times like these where the difference between a good stock and a great one really matters because you don’t want to stick your neck out for something that’s merely good.”
In turn, Cramer compared two supermarket operators to determine which is best, namely Whole Foods Market and The Fresh Market. Both companies sell natural and organic foods, which Cramer noted is the fastest growing segment of the supermarket business. Perhaps not surprisingly, then, both stocks are trading in lockstep — in the last 30 days, each has posted a 30 percent gain.
To Cramer, the “one big difference” between the two companies is that Whole Foods is bigger — it has a $17 billion market capitalizationand three times as many stores as The Fresh Market, which has a market cap of $2.5 billion.
Cramer noted The Fresh Market’s stock is also slightly less expensive, currently selling for 30.9 times next year’s earnings with a 22 percent long-term growth rate. Meanwhile, WFM trades at 33 times next year’s earnings with an 18.2 percent growth rate. In Cramer’s opinion, though, Whole Foods is more expensive because he thinks it’s “best of breed.”
As avid “Mad Money” viewers know, Cramer most always recommends investors pay up for “best of breed” stocks. In this case, Whole Foods is no exception.
“Whole Foods has the stronger brand, better same store sales growth, and while it has less room to expand, the company is nevertheless accelerating its new store rollout,” Cramer said.