Here's my up-front admission: Grocery stores are nowhere near my favorite investment theme. Food and basic staple retailing is an old and hypercompetitive business with low (rightfully, in my opinion) profit margins. Plus, the industry has been facing disruption from the likes of Amazon in recent years, with other big box stores like Walmart and Target also investing heavily in digital grocery and delivery.
That has put pressure on shares of Sprouts Farmers market (NASDAQ: SFM) even though the organic grocer has been steadily growing its real estate footprint and picking up new traffic at existing stores along the way. Share declines paired with business growth has meant the stock has been flirting with something resembling a value investment, even in spite of my disinterest in the boring grocery space. Meanwhile, recent IPO Grocery Outlet (NASDAQ: GO) is priced as if it's a high-flying technology stock, not a deep-discount food retailer.
Guess which one I think is the better buy.