Whole Foods, Certainly.......Whole Stock, Not Necessarily
Yellow caution sign. Fact stock has fallen nearly 6% 9.24% in after hours today based on disappointing performance and more importantly weak forward guidance. This is reinforced by insiders, officers and directors recently selling 1.9 million shares in 44 separate transactions. Additionally WFM has a high forward PE of 38.45 and a five year forward PEG of 1.77, approaching the 2.0 flashing red light danger zone signaling excessive valuation, and a modest 0.8% dividend.
Whole Foods high beta stock, has merely matched the performance of the S&P for the past 1 year, 3 months and YTD. Many expect the market to pullback by 5-10% sometime between now and the replay of the Washington DC thriller horror movie " Sequestration " at the end of February. A low beta stock could expect to experience a ratable retrenchment, higher beta issues have exaggerated movements up in good times and down during pullbacks. WFM dropped from $ 98 November 6 to $ 88.09 November 14. Over three months later the stock has still not reached $ 98.
Conclusion, Whole Foods is a quality company, however at current price levels the 30-60 day risk/return is disproportionately negative. A price of $ 87.70- $ 88.09 offers a better return with lower risk.
Fact or precedent based comments and alternative perspectives welcome.