Coconut water powder for a health drink... Gluten-free pizza crust... Sustainably poled and trolled tuna from the U.S. Pacific Northwest... These may sound like the forgotten dreams of flower children, but on the Street, organic food is the fastest-growing segment of the global grocery market.
And investors who ride the wave could see impressive profits from this trend.
For example, while domestic food sales continue to grow at an anemic pace of about 1% annually, the organic segment is experiencing explosive gains. Organic food sales are on pace to reach $42 billion in 2014, a 31% increase from $29 billion in 2010. Globally, the trend is just as strong, with organic food sales expected to top $100 billion by 2016. More than half of this demand is expected to come from the United States and its 40-plus million organic customers.
These are the same forces that have lifted Whole Foods (WFM) to a market-smashing gain, up 2,800% since going public in 1992.
There are powerful social forces driving the trend.
Today, many consumers prioritize health over price. Concerns about toxins, chemicals and fertilizers have many consumers choosing the organic route, a process that eliminates the use of synthetics. These people also express concerns about sustainability, worried about the effect of depleting the environmental resources involved in bringing fish, meats and various agricultural products to market.
The last factor driving the organic trend is a matter of health and fitness. Centers for Disease Control statistics show that from 2009 to 2010, 33% of the domestic adult population was overweight, with 37% qualifying as obese. While still high, obesity figures have steadied in recent years. Health is increasingly becoming a priority.
As you can see, it's no coincidence that the organic-food industry is in for a period of huge growth.
But if you missed the insanely huge gains that Whole Foods provided investors, then don't worry.
History is about to repeat itself.
That same cycle that lifted early investors in Whole Foods to huge gains is again developing. Here are four small-cap organic-food stocks in position to cash in.
Risks to Consider: Although organic food shoppers tend to be higher income and less vulnerable to economic fluctuations, high-priced food items are vulnerable to slower consumer activity. Higher input costs for organic food companies are also a potential threat to margin strength.
Action to Take --> The organic food space is red hot right now. That trend is only expected to strengthen in the next four years, as consumers become increasingly sensitive to social and health issues. From the four stocks I highlighted, I particularly like Hain Celestial and The Fresh Market because of their bullish growth projections and attractive valuations.