Sell Whole Foods, Buy McDonald's

It would be one thing if the stock were not already trading at an inflated valuation, but it is. There is no question it deserves a considerable amount of credit for having navigated through some difficult periods, but at this point, it is time to unload some shares.

It seems investors continue to show an inability to separate their love for a business or product with what translates into a good investment -- a perfect example being a cultish name such as Sirius XM(SIRI) , whose CEO, Mel Karmazin has also been dumping shares -- except for different reasons.

For Sirius, the recent insider sales coupled with some concerns over its competitive advantage imply a lack of confidence in the future -- one where it is even more critical to pay attention to not only the insiders, but also that of its biggest shareholder, Liberty Media(LMCA) , which is looking to acquire majority ownership of the company.

The fundamentals of Whole Foods, however, suggests its long-term outlook remains as promising as its performance over the past five years, evident in the level of loyalty its customers have shown during the height of the recession when it traded at a paltry $10.

One stock that investors should be buying instead is McDonald's(MCD) -- particularly in uncertain times like these where safety always comes at a premium. Over the past decade the company has increased average annual sales by at least 6% while more than doubling its operating margins. Even more remarkable is the fact that McDonald's boasts an almost 30% operating margin over the past five years where its closest competitor comes in at just 14%.

Furthermore, the company boasts one of the strongest balance sheets within the entire market. Its solid margins coupled with consistent earnings make it one of the safest bets in severe bear markets -- one that also offers respectable dividend yield of 3.10%. While McDonald's fast food business might be the antithesis to the mission of Whole Foods, from an investment perspective it does present the better value -- topping also Chipotle.

Bottom Line

There is no doubt that Whole Foods has an excellent business and the recent selling of its CEO does not suggest that there is anything fundamentally wrong with the company. In fact, it is worth noting that Mackey's total ownership stake is quite significant in spite of his recent sales.