Top picks 2012: Hain Celestial Group

Growing appetite for organic products makes Whole Foods supplier a healthy choice.

By TheStockAdvisors Dec 30, 2011 5:09PM
Image: Grocery shopping (© IT Stock Free/Jupiterimages)This post is one in a series in which over 50 newsletter advisors share their Top Picks for 2012

By Bernie Schaeffer, Schaeffer's Investment Research

Hain Celestial Group (HAIN) offers natural and organic products, which are found mostly in Whole Foods Market (WFM) stores.

The company's product lines include beverages, frozen desserts, infant and toddler food, baking mixes, hot and cold cereals, pasta and other organic grain products. 

In the U.S., consumption of organic products has increased by nearly 20% per year, while "conventional" food consumption has increased by only 2%. Meanwhile, the international organic food market has grown exponentially. As the largest supplier to fast-growing Whole Foods Markets, Hain is poised to capitalize on these trends. 

Since bottoming with the broad market in March 2009, Hain's stock has rallied by over 200%, outpacing the S&P 500 by about 125%. This significant outperformance can be expected to continue. The stock is currently trading near $36, only $4 from the all-time high in late-2000.

The rally has been supported by a rising 20-week moving average, which currently resides just below current price levels and could continue to provide support on pullbacks. 

Despite this very strong performance, there is still some skepticism among the analyst community. Currently, there are three "hold" ratings on HAIN, which creates strong potential for upgrades.  

Additionally, the current short-interest ratio stands at over 6, meaning that it would take over six days of trading volume to unwind these bets against the equity. Investors can expect a fierce rally if the shorts should panic and begin covering on a large scale.

With a strong fundamental and technical backdrop, contrarian investors enjoy seeing skeptical sentiment as it indicates additional sideline buying power. 

As stocks typically climb a "wall of worry," a continuation of current trends could lead to yet another year of major outperformance.

Steven Halpern's TheStockAdvisors.com offers a free daily review of the favorite stock ideas of the nation's top financial newsletter advisors.

Tags: HAINWFM
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