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Sell Whole Foods, Buy McDonald's

NEW YORK ( TheStreet) -- Whole Foods (WFM - Get Report) has been one of those stocks that I have always wanted to fall in love with, but just couldn't. Fundamentally, I value its healthy eating strategy and the company has demonstrated that is has an exceptionally sound business -- one that continues to grow despite severe economic concerns.

The challenge for me has been its stock price. I have always considered it expensive. The market, however, has had different ideas. Investors can't seem to get enough and remarkably, the stock has developed the same appeal as Chipotle (CMG) where valuation metrics have become unimportant. But I think it has now become time to take a more serious look at where things are and where they may be heading.

Over the past five years there have not been many stocks except for Apple (AAPL) that have performed as well as Whole Foods -- a 90% increase including gains that at one point reached as high as 30% on the year. I will admit the company does fit the criteria of not only a growth stock, but one that has the components in place to justify its multiple.

However, as a value investor and more importantly one who also appreciates some margin of safety, coming to terms with a stock that is trading at 38 times earnings continues to be a challenge that is just too much to overcome. Recently, the company's management seems to agree.

Since the stock reached its 52-week high of $91.50 on May 4, it appears that some key insiders have decided it is time to dump some shares and lock in profits. However, none was more significant than the recent sale executed by CEO John Mackey: 50,000 shares at an average price of $90.

With the stock having closed more recently at a price of $83, clearly Mackey had made the right decision and at the right time. However, it now begs the question, should investors follow suit?

It goes without saying that one of the best indicators of when to enter or exit a position on a stock has always been by monitoring the activity of insiders, so why should Whole Foods be the exception?
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