I spent 15 minutes on Sunday morning petting veal.

Let me rephrase that: I spent the morning getting to know a herd of young calves that sometime this week will go through a cruelty-free slaughter and end up on the plates of diners across the Mid-Atlantic region.

Recently, I’ve become a bit of a foodie. I get a little bit of flak sometimes in the office when I come in and talk about the amazing piece of rabbit I had last weekend, or the duck or even (gasp!) controversial foie gras I was looking forward to having for dinner.

Of course, being someone who respects animals and loves food, I couldn’t give up the opportunity to visit a certified organic working farm this weekend. I spent the majority of my weekend at Ayrshire Farms in Upperville, Virginia, about half an hour from the Washington, D.C. beltway.

Rare Breeds

Ayrshire Farms is on a massive parcel of land. It specializes in rare and endangered breeds of livestock, as well as heirloom fruits and vegetables. I am lucky enough to be acquaintances with a horse trainer there, so I ended up with an unofficial tour of the entire farm. As a certified organic working farm, Ayrshire uses humane and sustainable farming methods and preserves the genetic structure of the herds that are kept there.

We had the opportunity to schmooze with some of the rarest breeds of animals, from Shire horses to Scotch Highland cattle and milking shorthorn dairy cattle to Gloucester Old Spot hogs. There were also free-range chickens, turkeys and ducks. It’s like looking into the past when you walk up to the Ancient White Park cattle, which are an English breed purely descended from a herd started in Chillingham, Northumberland, during the 13th century!

The organic farming operation is more than complicated. As a city girl, I really can’t put my head around it. To think of how many people it takes per day to keep the food pure and healthy, following stringent guidelines, is unable for me to fathom. But it should be natural when you think about it: While organic farming and “buying organic” is considered a new fad for the 21st century, farmers used to do it this way before chemical pesticides were introduced in the later half of the 20th century.

Organic Farming

Ayrshire Farms focuses on biodiversity as they control the population of the animals through grazing rotation and swap different heirloom and hybrid vegetables, herbs and fruits through crop rotation. They even have four dogs (two black Labrador retriever mixes and two beagles) that protect many of the crops from deer. And to top it off, they manage their own organic waste for compost.

The vegetables, fruits and herbs are available to farm staff and the Hunter’s Head restaurant, which we were fortunate enough to dine at with a 30% discount. (I heard of the 30% discount and found the most expensive dish on the small pub’s list: a tender filet with fresh mashed potatoes and vegetables right from the farm!)

Of course, I’m always trying to find the investment angle with every trip I make, whether business or personal. With the economy in a hotly debated “recessionary period,” how well are organic grocers and food producers doing in the current climate… and will people continue to buy organic even as inflation pushes food prices higher and higher?

There’s no doubt that food is expensive: I bought a salad and soup for lunch from a grocery store and ended up spending a whopping $8, way more expensive than if I had stopped at a fast-food joint! And the vegetables in my salad weren’t even organic.

Is Anyone Buying Organic?

Of course, the first company that comes to mind when you think of organic food is Whole Foods Market Inc. (WFMI:Nasdaq). It’s the world’s top natural food-store chain, selling items free of pesticides, preservatives and sweeteners. Whole Foods also claims to be cruelty-free. WFMI recently acquired its biggest competitor, Wild Oats Markets. So it should be doing well, right?

Sadly enough, in the recent market downturn, WFMI has not fared well. Its first-quarter earnings dropped 27%, partly because of its OATS acquisition. However, it is in the middle of a $300 million stock repurchase program, which should be complete in 2009.

(One of its saving graces could be its yield of 2.3%, or 80 cents per share, in annual dividend payouts.)

WFMI stock has fallen from a high of $53.65 per share to its current price of $35 per share only since the beginning of October. But since December 2005, WFMI has been in a steady fall from $77 per share, a decline of 55% in more than two years.

It seems like no one’s really “buying organic” anymore as an investment… and even as food for the table.

Interestingly enough, on the technical side WFMI is right at its long-term 61.8% Fibonacci Retracement, a very strong historic support line for stocks looking to enter a new rally.

Are Gurus Buying Organic?

I wanted to see what the big guys thought about WFMI, so I looked up recent 13-F filings from gurus and larger institutions. (Under law of the SEC, any person or institution working with more than $100 million in capital needs to file a public quarterly report called the 13-F to display what they’re buying and selling in bulk.)

As of the last quarter of 2007, guru investor George Soros entered a new position on WFMI. Mark Hillman of Hillman Capital Management (with over $500 million in assets) added Whole Foods, which now totals a 1.2 million share position.

Both of these guys are showing a current loss on this organic grocer. I guess only time will tell.

Are Organic Distributors Better?

So, are there any other fair-game stocks in the organic sector to look at? After all, groceries are something that people buy regardless of the economy. We all have to eat. But it’s sad to say that organic food may be something that will be considered a fad if Americans’ buying power continues to be crunched.

United Natural Foods Inc. (UNFI:Nasdaq) has been a recent favorite of George Soros as well, although he’s sold his positions in it twice in the last year. UNFI is a natural and organic food distributor in the United States to places like Whole Foods. Its stock has taken a terrible dive, from $38.40 at the end of 2006 to $17.13 per share currently — a decline of 55% in a little more than a year.

UNFI has seen its profit shrink by 17% in its recent second fiscal quarter. And it cut its profit forecast for the year.

Recession-Proof With This Institutional Food Distributor

For current investment purposes, it would work well to stay away from organic grocer and distributor stocks… at least until they begin to turn around. While some people may continue to buy organic, it’s definitely proved a short-term fad in the investing community.

To recession-proof your portfolio another way in the food arena, I suggest a holding we currently have in Diligent Investor: Sysco Corp. (SYY:NYSE). Sysco is a food distributor in the United States and Canada to restaurants, hospitals, nursing homes, schools and colleges and hotels and motels… all places that won’t stop ordering food in a recession.

Besides, everyone’s got to eat — even if they’re in school, the hospital or jail.

And according to the 13-F database, gurus are loving it, too: Dodge & Cox opened a new position by buying over 28,000 shares of SYY for its portfolios in the fourth quarter of 2007 and Richard Aster Jr. bought more than 22,000 shares.

As for me, I’m awaiting a spring trip back to Ayrshire Farms for another one of those fresh filets! And maybe some of that fresh veal. I’m sure I could afford to splurge.