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Keep Your Cheese Out of Annie's

NEW YORK ( TheStreet) -- Investors who were willing to pay north of $46 per share for Annie's (BNNY) stock weren't pleased when I talked down the company's prospects back in December.

Although Annie's had strung together some solid earnings results, I never bought the notion that the stock commanded the premium investors were willing to pay. Annie's (then) traded at a price-to-earnings ratio of 61, which was (then) twice the earnings multiple of Hain Celestial (HAIN). If that weren't bad enough, Annie's valuation also tripled shares of Mondelez (MDLZ). And these are two top-notch performers in packaged foods.

[Read: Greenberg: Coke's Green Mountain Stake Not a Day Too Soon]

This suggested the Street was expecting strong growth from a hot packaged food sector that has been anything but appetizing. Although the company does focus more on natural and organic foods (a growing segment), management had developed ambitions to compete more with the likes of Kraft (KRFT). In other words, Annie's wanted to broaden its scope. This made perfect sense, and investors were correct to applaud the idea.

The Street, however, didn't factor in the cost this conversion would incur on near-term margins. All of this would take place while the company relies on a higher-earning demographic for its business. Annie's success was too heavily predicated on a robust economy. All told, at a P/E of 61, there were too many risks for my taste.

Three months later, these shares are down 13%. After having correctly called the top, investors want to know if it's time to take a nibble. While management has done a stellar job selling investors on the long-term sustainability of the natural and organic foods market, Annie's is still a relatively young company that has less than two years as a public issue.

That the company's stock has soared well over 140% during that span is remarkable. I do believe, however, that this has been another case of "theme-based investing." And we've seen this same reaction in the tech sector as well where, for instance, all cloud-related stocks traded at sky-high valuation. This is because everybody believed the cloud and "Big Data" was the next big thing. That buzz has somewhat fizzled.

Similarly, I believe Annie's has seen its stock ride the wave of Whole Foods (WFM) and Fresh Market (TFM), two companies that created the stir around healthy lifestyles, particularly any product preceded by the word "organic."

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