Invest in one Kraft (KRFT) or Whole Foods (WFM)

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Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby SpaceSashimi » Thu Jul 25, 2013 3:46 pm

I dont see whole foods market slowing down and on the other hand Kraft makes products that we all use and will slowly go into healthier foods as well.
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby flossy21 » Thu Jul 25, 2013 3:52 pm

How about both? Buy an index (TSM?) which owns them and many more so you minimize your downside potential.

You won't get many opinions here on your question because Bogleheads are into buying broad swaths of the market, at low cost and holding them for the long term. Purchasing individual equities doesn't fit into the philosophy.
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby MN Finance » Thu Jul 25, 2013 4:15 pm

That's what they said about DELL and ENE 15 years ago. Picking individual stocks for anything other than entertainment is a fools game. (Seriously they did say that, they were 2 of the top 5 picks in a well respected article in 99 if the must own stocks for the next decade, no mention of XOM or AAPL BTW.)
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby Call_Me_Op » Thu Jul 25, 2013 4:18 pm

SpaceSashimi wrote:I dont see whole foods market slowing down and on the other hand Kraft makes products that we all use and will slowly go into healthier foods as well.


And you don't think that others have thought this too and have priced this in? You need to understand what drives stock prices, and the difference between a good company and a good stock. Better yet, you want to learn about compensated versus uncompensated risks.
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby nisiprius » Thu Jul 25, 2013 4:31 pm

Platitudes like real estate must be a good investment because "they aren't making any more land," or healthcare must be a good sector to invest in "because boomers are aging" or Coca-Cola must be a good investment because "I personally know Coke tastes better than Pepsi"... are worthless. The idea that "great" blue-chip companies are safe investments is wrong. What would you have said about GE in the late 1990s? Wouldn't you have said they were the safest investment in the world, a great company, globally diversified, and diversified in its businesses, thirty different business units, each one of the top three in its category, and widely view as one of the best managed companies in the world? If you can prove that you wrote down a note in 1999 saying "I think it would be foolish to invest in GE over the next decade," then I will acknowledge that you are an investing genius and I'll seriously consider buying some Kraft or Whole Foods stock.

From John C. Bogle, Clash of the Cultures, 10 Rules of Investing:
#5. Forget the needle, buy the haystack. Buy the whole market and you can eliminate stock risk, style risk, and manager risk. Your odds of finding the next Apple (AAPL) are low.
From Larry Swedroe, The Quest for Alpha, Rules for Prudent Investing:
#17. Owning individual stocks and sector funds is more akin to speculating, not investing. The market compensates investors for risks that cannot be diversified away, like the risk of investing in stocks versus bonds. Investors shouldn't expect compensation for diversifiable risk--the unique risks related to owning one stock, or sector, or country fund. Prudent investors only accept risk for which they are compensated with higher expected returns....

#19. Before acting on seemingly valuable information, ask yourself why you believe that information is not already incorporated into prices. Only incremental insight has value. Capturing incremental insight is difficult because there are so many smart, highly motiivated analysts doing the same research. If you hear recommendations on CNBC or from your broker or read them in Barron's, the market already knows the information it is based on. It has no value.
From William J. Bernstein, The 15-Stock Diversification Myth
So, yes, Virginia, you can eliminate nonsytematic portfolio risk, as defined by Modern Portfolio Theory, with a relatively few stocks. It’s just that nonsystematic risk is only a small part of the puzzle. Fifteen stocks is not enough. Thirty is not enough. Even 200 is not enough. The only way to truly minimize the risks of stock ownership is by owning the whole market.
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby widestance » Thu Jul 25, 2013 8:04 pm

In the long run, i can't see how Whole Foods can be any more profitable than regular grocery stores.

I realize that some people will pay a premium for presumably healthier food. If the trend continues, it's only a matter of time before Whole Foods competitors will spin-off from the major chains.

Having worked in the grocery industry for major chains for nearly 15 years, i can tell you the profit margins are ridiculously small. Small as in 1 cent net profit for every dollar in sales. Looks like whole foods is about 4x that, but i wouldn't count on it happening indefinitely.
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby SpaceSashimi » Fri Jul 26, 2013 12:50 am

Never invest in stocks - Bogleheads
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby kenyan » Fri Jul 26, 2013 1:10 am

SpaceSashimi wrote:Never invest in stocks - Bogleheads


That was your take after the responses? 99.X% of Bogleheads invest in stocks.
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby Call_Me_Op » Fri Jul 26, 2013 7:08 am

SpaceSashimi wrote:Never invest in stocks - Bogleheads


You obviously mean "individual stocks." Never is a strong word. But there is a good, scientific reason why Bogleheads prefer mutual funds over individual stocks. That's why I suggested you learn about compensated versus uncompensated risk.
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby kenyan » Fri Jul 26, 2013 10:17 am

Many Bogleheads do believe that investing in individual stocks can a reasonable plan for part of one's equity portfolio once it is of sufficient size (think 7 figures) such that one can achieve adequate diversification while still minimizing transaction costs. Buying - and holding - individual stocks can actually be more cost effective with a very large portfolio, since the expense ratio will be zero (though the ER of, say, VTSAX is very small, it would still cost you over a thousand dollars annually on $2M).

However, implementing this is time-consuming, and you need to have the interest and discipline to make it happen. Each company purchased should be researched and understood, and you need to do this with 30+ (more is better) companies that you purchase, as well as however many more companies you reject. Read some Benjamin Graham, or ask some of the posters here who do just this.
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby nedsaid » Sat Jul 27, 2013 9:51 am

If I had to pick, I would own Kraft over Whole Foods. First, Whole Foods is basically a grocer. The margins for grocers are about 1 1/2 percent. A very tough business with very low margins and intense competition. Whole foods might be an expensive fad that goes away in a few years. Kraft has been around a very long time and I would expect it would have a lot more staying power as a company.

Most Bogleheads prefer the broad based index funds over individual stocks. I do own some individual stocks and they are probably a bit less than 15% of my retirement portfolio. They have done about as expected, I doubt that I have beaten the market. To do individual stocks correctly, it takes a lot of time and research effort. I just work with a broker. Even in the brokerage account, I hold index like ETFs. I don't trade my stocks very much. I am indexing more and more with my portfolio and working my expenses down.

You can't go wrong with the broad indexes.
A fool and his money are good for business.
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby Caduceus » Sat Jul 27, 2013 12:33 pm

It's not that the Bogleheads are piling on you, although it may seem that way because the choice you wanted was between Kraft and Whole Foods, and the advice here has been "no, just buy an index fund!" I think it's possible but very difficult to earn outsized returns from picking stocks. I'd recommend reading some books about value-investing (Benjamin Graham's works for instance), or even just starting with something interesting (Roger Lowenstein's biography of Warren Buffett is astounding - one of the best biographies I've read) that will give you a sense of just how difficult it is to identify good stocks at a good price. You may be right about the future prospects of Whole Foods, but wrong about its price, or right that it is currently undervalued but wrong about its long-term prospects.

Buying into an index eliminates a lot of that work. It can be fun too - you can think about your asset allocation (how much to U.S.? How much to international? Do you want to buy REITs or the small-cap index?) So there's "stuff" to do/tinker with that don't have anything to do with picking individual stocks. Alternatively, you could set aside a part of the amount you're investing (say, 10% - 15%) and purchase individual stocks, so you'd end up having core holdings comprised of index funds and satellite holdings of individual stocks.

As to whether to invest in Kraft or Whole Foods (the original question), I'm afraid I wouldn't venture to guess without having looked at the balance sheets, the income statements, the other SEC filings, and other available information. Without doing some sort of research, how could my opinion be anything more than an extremely uneducated guess?
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby momar » Sat Jul 27, 2013 1:00 pm

If you have to ask anonymous internet strangers whether you should invest in the stock of a well known company, do you really think you know anything even anonymous internet strangers don't?
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby nisiprius » Sat Jul 27, 2013 2:23 pm

Caduceus wrote:...I'd recommend reading some books about value-investing (Benjamin Graham's works for instance)...
Agreed. If you accept Graham as an authority, perhaps you should begin by reading what he said in 1976, in A Conversation with Benjamin Graham, specifically:
In selecting the common stock portfolio, do you advise careful study of and selectivity among different issues?

In general, no. I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities. This was a rewarding activity, say, 40 years ago, when our textbook "Graham and Dodd" was first published; but the situation has changed a great deal since then. In the old days any well-trained security analyst could do a good professional job of selecting undervalued issues through detailed studies; but in the light of the enormous amount of research now being carried on, I doubt whether in most cases such extensive efforts will generate sufficiently superior selections to justify their cost.
Then, perhaps, you will feel that it is not essential to read Graham and Dodd.

It seems obvious to me that to invest successfully in individual stocks, that it is a necessary condition to think something different from the market, and to be right while the market is wrong. The only ways this can happen are to have inside information and get away with using it, or to be so deeply immersed in the business details of a company that you can see things that are missed by professional analysts, with access to all sorts of costly subscription services, who get paid to spend their full work week following a couple of stocks.
Last edited by nisiprius on Sat Jul 27, 2013 2:27 pm, edited 1 time in total.
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby statsguy » Sat Jul 27, 2013 2:27 pm

SpaceSashimi wrote:I dont see whole foods market slowing down and on the other hand Kraft makes products that we all use and will slowly go into healthier foods as well.


We invest in individual (dividend) stocks. I have considered both in the past, but don't think either is a very solid dividend stock.

WFM cut its dividend during the great recession showing that its commitment to the dividend is not what I would prefer. The share price has recovered and, in my opinion, is currently vastly over-valued. I think purchasing now you have probably missed most of the share price growth, but I really don't know. I would not consider buying this company for more than $26.50 per share and probably less. The company has solid same store sales growth and seems to have found a niche market. Personally, after shopping there for a few years we have slowly moved to other stores as we find the prices high. Still we do occasionally shop there for certain items we cannot get elsewhere. Bottom line, this stock does not interest us because it is over-priced, does not have a strong commitment to the dividend, and I don't see how it is going to keep growing.

KRFT bought Cadbury in 2010 to gain a foothold in the international market and then turned around and spun off Cadbury as Mondelez in 2012 to focus on domestic market. We lost interest when Kraft purchased Cadbury in 2010 as I thought this would make it harder for Kraft to pay its dividend. Whether or not we were correct in 2010 to lose interest is unimportant, but it seems to me that buying and spinning off the same company in just a two years indicates some kind of problem with management. So again not interested. KFFT is also priced a little higher than I would prefer to pay... I would not pay more than $35/share. Also, you said KRFT will go into healthier foods, which may be true, but they were and are a central player in the trans fat mess (Kraft is being sued (class action suit in California) for claiming their foods are healthy even though they contain trans fat. Krafts defense is that their labeling is technically correct and that something technically correct is correct and therefore not misleading... the suit is ongoing).

In the Consumer sector I think both KO (Coca-cola), which is a direct and larger competitor, and CLX (Clorox) are better options.

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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby MN Finance » Sat Jul 27, 2013 3:09 pm

SpaceSashimi wrote:Never invest in stocks - Bogleheads


You started a thread with absolutely nothing other than some ridiculous comment about you not being able to "see" whole foods slowing down, as the basis for an investment decision. That's about what my 8 year old son told me about TGT (so for fun we bought 100 shares). You clearly know the investment philosophy here. Further, if you would have actually posted some figures for discussion about free cash flow, p/b, earnings projections, market share analysis, etc, you may have actually gotten some educated replies from those on the board that do enjoy valuing and picking some individual stocks, but you didn't (stats reply notwithstanding, who is clearly one of the "best" here)
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby leonard » Sat Jul 27, 2013 3:14 pm

SpaceSashimi wrote:I dont see whole foods market slowing down and on the other hand Kraft makes products that we all use and will slowly go into healthier foods as well.


Or, broad index funds.
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby Caduceus » Wed Jul 31, 2013 8:28 pm

It seems obvious to me that to invest successfully in individual stocks, that it is a necessary condition to think something different from the market, and to be right while the market is wrong. The only ways this can happen are to have inside information and get away with using it, or to be so deeply immersed in the business details of a company that you can see things that are missed by professional analysts, with access to all sorts of costly subscription services, who get paid to spend their full work week following a couple of stocks.


I've often wondered (as I'm not in financial services) what proportion of Wall Street actually does value investing in the tradition of Graham/Buffett/Klarman. I'm not talking about people who "follow" stocks and try to predict whether quarterly earnings will exceed or fall below consensus estimates. I'm as much a convert to the indexing philosophy as any other Boglehead, but I think that there are people (not the vast majority of us, that's for sure) who have a knack for evaluating businesses. Although in the case of Warren Buffett, the more I read about his life, the more it seems that he wasn't just an investor. By sitting on the boards of companies and through his relationships with people, he helped forge the strategic direction of several ventures that may otherwise well have failed disastrously.
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby LadyGeek » Wed Jul 31, 2013 8:47 pm

Call_Me_Op wrote:
SpaceSashimi wrote:I dont see whole foods market slowing down and on the other hand Kraft makes products that we all use and will slowly go into healthier foods as well.


And you don't think that others have thought this too and have priced this in? You need to understand what drives stock prices, and the difference between a good company and a good stock. Better yet, you want to learn about compensated versus uncompensated risks.

ErmergDoc's blog has a good tutorial: Uncompensated Risk
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby Calm Man » Wed Jul 31, 2013 8:52 pm

I would buy Trader Joes if I could. It is remarkable. I am a shopper by no means but get great pleasure shopping there are buying things that basically are not available anywhere else. One pound bags of frozen mixed peppers (red, green and yellow) for under $2. Whole wheat bread with no salt. Wine for less than $3 called $2 buck chuck. A very highly sophisticated and intelligent clientele there as well. As to Whole foods vs Kraft, I no nothing about valuations but I sure wouldn't go with a single retail grocer like Whole Foods(except TJoes) as it literally takes nothing to replicate the model.
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby Default User BR » Thu Aug 01, 2013 3:57 pm

Calm Man wrote:I would buy Trader Joes if I could. It is remarkable.

But, what do you know about Whole Foods that everyone else doesn't?


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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby Ged » Thu Aug 01, 2013 4:06 pm

I found I my returns are better and I sleep much better since I sold my individual stocks.

So I would say just buy a total market fund.
Lack of planning on your part does not constitute an emergency on my part.
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby nisiprius » Thu Aug 01, 2013 4:30 pm

Default User BR wrote:
Calm Man wrote:I would buy Trader Joes if I could. It is remarkable.
But, what do you know about Whole Foods that everyone else doesn't? Brian
That it isn't the same chain as Trader Joe's? Not everyone seems to know that...
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Re: Invest in one Kraft (KRFT) or Whole Foods (WFM)

Postby snyder66 » Thu Aug 01, 2013 5:08 pm

Why don't you invest money in a local farmer every year? Community Supported Agriculture helps the little farmer trying to eek out a living. Plus you get an awesome share of organic produce to boost.
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