Whole Foods making news

Whole Foods (WFMI) is a stock that doesn’t often make the news but is making headlines now. Whole Foods, the biggest U.S. natural-foods grocer, said that it’s making a “historic” purchase of renewable energy credits from wind farms to offset 100% of the energy it projects it will use in 2006 to run its stores, facilities, bake houses, distribution centers, offices, and headquarters in the U.S. and Canada.

Whole Foods spokeswoman Ashley Hawkins declined to disclose the purchase price. Clearly, investors need to consider how costs might influence profits at WFMI, shares of which currently trade at close to 79 times earnings. WFMI has historically traded at very high multiples.

At first, Whole Foods reminded of of the Washington Post because it has a wide moat. That is, its position in the market is dominant and new competitors are unlikely to show up, much less prevail. However WPO has a PE around 23.5. I suppose Starbucks (SBUX) is a better comparison with its customer loyalty and its PE over 50.

Personally, I don’t understand why stocks like WFMI and SBUX trade at much higher price to earnings rations than a stock like WPO. With WPO shares down to 771 (down over 18.00 or 2.3%) WPO is a stock I have to reconsider. For those of you keeping track, the stock price was around 750 when I mentioned it on Nov. 20, 2005. At the moment I am not invested in WPO stock.

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