The Best Stocks to Buy in What We Eat

There are few things more constant and important to life than food. For this very reason, the companies that feed us can make for some of the best investments.

On the other hand, they can also make for some of the worst if we aren't careful with how we invest and what we invest in. After all, there are hundreds of restaurants, grocers, and food makers for investors to pick from. Let's dig in, and talk about some of the best stocks to buy in what we eat.

Learning from recent historyWhen it comes to investing in this broad category, a great place to start is by looking at the big-picture trends. A major one? The health impact of the foods we eat.

Over the past several decades, obesity rates have skyrocketed in the U.S. (and other Western countries), corresponding with increases in diabetes, heart disease, cancer, and other illnesses. According to the U.S. Centers for Disease Control and Prevention, more than 17% of American children are obese, more than triple the rate 20 years ago. The numbers are even higher for adults, with more than one-third obese.

The CDC calls obesity an epidemic. In a video on the CDC's website, epidemiologist Dr. Latetia V. Moore said the following:

For the past several decades, trends linked with obesity -- including higher demand for processed foods and more meals being consumed out of the home -- made for some of the best stocks:

GIS Total Return Price data by YCharts.

If you'd invested $1,000 each into General Mills ,McDonald's ,The Coca-Cola Co., andPepsiCo in 1988, your investment would be worth more than$105,000 in stock value and dividends today.On a $4,000 investment.

But the health angle looks like it's turning the tide against these food giants, with sales and profits declining:

GIS Revenue (TTM) data by YCharts.

None of these companies are beating the market since 2011, and their valuations have all increased as well:

GIS Total Return Price data by YCharts.

In other words, these stocks are getting more "expensive" even as business results deteriorate.

Spotting the next big trendsConvenience remains important, but consumers are demanding better quality and healthier choices. A handful of companies are well-positioned to benefit from those trends, andWhole Foods Market,Hain Celestial Group, andChipotle Mexican Grill are three of the likely long-term winners.

While most people know about Whole Foods' and Chipotle's reputations and businesses built around healthy, natural foods and sustainable farming and sourcing, Hain might be a mystery beyond Celestial Seasonings teas that your grandmother drinks. But that's only a small part of the business.

Hain -- under founder and CEO Irwin Simon -- has amassed a collection of "better for you" and organic packaged food brands, with many like Rice Dream, Arrowhead Mills, Greek Gods, and Terra Chips at or near the top in their category. Last quarter the company had 10 different brands grow sales more than 10%, and the company has grown total sales at double-digit rates for 18 consecutive years.

Before you think it's too late to invest in the company -- it can't grow at that rate much longer, right? -- remember that Hain only recently broke $2 billion in annual sales. There's room to grow. For context, here's General Mills' revenue compared to Hain's over the past 30 years:

GIS Revenue (Annual) data by YCharts

Don't get me wrong: I'm not promising that Hain will be the next General Mills. But I am emphatically stating that there is plenty of room for Hain to continue growing sales.

Worth the price?Chipotle's and Hain Celestial's price-to-earnings ratios above 40 and 50, respectively, are "expensive," but there's almost always a premium for growth. Whole Foods, on the other hand, is roughly the same price-to-earnings multiple -- around 25 -- as Coke and General Mills. But if the companies continue to execute on their historical growth -- and there's strong evidence that the trends are in their favor -- then an investment even at the current premium could very well pay off big. Over the years, all three have delivered. Since Chipotle's IPO:

WFM Revenue (TTM) data by YCharts

Shifting consumer sentiment is driving more customers to these three companies, and shareholders are getting rewarded.

Not only are these companies riding that wave of consumer demand, but they share another characteristic that is often found with great companies: Their founders are still involved in running the business. All three still have a founder as CEO (co-CEOs in the case of both Chipotle and Whole Foods), and this strong cultural connection to what these companies are about shouldn't be discounted. Frankly, it's often at the very core of what makes a company great.

Time to take a bite?I'm not here to try to convince anyone that these three stocks qualify as value plays (though the case could be made that Whole Foods is close). We each must decide if today's price is worth tomorrow's potential. But with that said, I'd much rather invest in companies that have the tailwind of consumer demand than ones swimming against the current.

Think about it this way: If you'd bought General Mills stock at the end of 1985 -- its P/E multiple was 38 at the time -- your total returns since then would look like this:

GIS P/E Ratio (TTM) data by YCharts

Opportunity for long-term growth can be as important as price, as General Mills' 30 years of great returns attests to. It looks like the winds have changed, and three younger, more expensive stocks might be the better bets today.

The article The Best Stocks to Buy in What We Eat originally appeared on Fool.com.

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Jason Hall owns shares of Apple, Chipotle Mexican Grill, Coca-Cola, Hain Celestial, and Whole Foods Market. The Motley Fool recommends Apple, Chipotle Mexican Grill, Coca-Cola, Hain Celestial, PepsiCo, and Whole Foods Market. The Motley Fool owns shares of Apple, Chipotle Mexican Grill, Hain Celestial, PepsiCo, and Whole Foods Market and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.