weiwentg (98.31)

ouch, Whole Foods ... and buying stocks in my first IRA

May 10, 2007 – Comments (0)

Whole Foods stock hasn't been kind to me this year. However, last year, so was Expedia, and now I'm up around 50%. The good ones all go up in the end, and I think Whole Foods is one of the good ones - better than Expedia, actually. Now, WFMI is down 10% on poor sales and comps growth, and on the FTC's concerns about the merger with Wild Oats Market.

I think WFMI has a lot of room for growth. I'm going to bet that they will succeed in their acquisition of OATS - I mean, is the FTC serious about antitrust concerns with combing one small and one tiny grocery chains? I think the negative near-term pressures are a buying opportunity.
And so, I have the opportunity to make my first-ever IRA contribution this summer, as I do a public health internship at a Catholic health system's headquarters. I'm an international student. I have $4,000 to spare. I do also have a big bunch in a taxable account, courtesy of the settlement from an auto accident. I intend to buy some stocks and a core fund.

Right now, the plan for the fund is Neuberger Berman Socially Responsive. It's one of the best SRI funds. It's growth-leaning on the M* style boxes, although it takes valuation into account. It uses a best in class approach to social screening, and does a fair bit of quiet advocacy. It has a bunch of mid-caps, but is mainly large-caps. It's also fairly concentrated (35-40 stocks), but I think it's usable as a core fund - one of my other core funds, Fairholme, has only 20-ish stocks.
Right now, I'm thinking 3 stocks: Bank of America, Johnson and Johnson, and Whole Foods. The former two are blue chips with stable, international businesses that will grow their dividends nicely, and are selling at a discount. I wouldn't have thought you could still get these two very nice businesses at a discount, but you can. Whole Foods, I have just discussed.

If I wanted lower-risk, I might substitute US Bancorp for BAC. BAC has international and wealth management operations that may be riskier. USB is growing slower, but I think the business risk is quite low. My overall portfolio is heavy on financials and healthcare stocks, so I might substitute UPS for either of those two. It's also a blue-chip with international diversification, selling at a discount.

For the fund, I have also considered other SRI funds: Citizens Value and Pax World Balanced. Pax is growth-leaning like NBSRX, and it's a 70-30 balanced fund. Citizens is more blendy, and has made a very good turnaround after some shoddy performance, but its expense ratio is higher. NBSRX is proven. So is Pax, actually, but I might as well go for an equities-only fund. For non-SRI options, I had considered Fairholme (which I own already) or Third Avenue Value. FAIRX's minimum contribution is $1k. TAVFX's is $2.5k. NBSRX's and PAXWX's is $250. Citizens is $1k. I am biased to SRI funds - call me an ideologue.
So, that's my tentative plan. Not sure if anyone reads this, but I do invite comments. In a way, I'm glad the market seems to be dipping - it's a good time to buy! Frankly, if it goes down even further, I'd be happy. but you can never call an exact bottom, so I think I will just buy my stocks the minute my IRA is open.