Executive Summary

We believe investor demand for heart and soul stocks will rise over the next decade as long-term strategic investors start to look for ways to play the appreciation of social capital and socially conscious investors start to look for companies with a greater purpose.

We identify Chipotle Mexican Grill (CMG-NYSE), lululemon (LULU-NASDAQ), Starbucks (SBUX-NASDAQ), and Whole Foods Market (WFM-NASDAQ) as companies with heart and soul as they each meet our following Four Cs criteria:

1. Conception – The founder planted the seeds for the movement inspired by a greater purpose and conceived the company through passion.
2. Core values – The greater purpose leads to a more authentic set of core values that serves to better guide the company.
3. Community – The movement attracts a community of cult-like followers from individuals who believe in its greater purpose and are seeking to align their values with those who they buy from, work for, and do business with.
4. Culture – The organic growth strategy preserves the cultural DNA and further strengthens the strong stakeholder foundation.

The strong and authentic stakeholder foundation of a heart and soul company will convert into a high velocity of social capital as the company leverages the high level of enthusiasm and deep psychological attachment to the company’s brand and greater purpose. We caution investors to be wary of artificial social capital generated through marketing tactics as although a company may appear to show a high level of “likes” or “followers”, the authenticity is what allows the business to sustain stakeholder relationships.

We believe social media will accelerate the value creation process for heart and soul companies by serving to lower the risk profile and act as a growth catalyst for companies to achieve the following three opportunities:

1. Grow Comparable Store Sales – Will act as a catalyst to drive sales productivity by increasing loyalty from existing customers and attracting new customers while reducing the following risk factors: economic, pricing, commodity price, consumer trend, environmental and product liability, regulatory, and technological.
2. Expand Geographic Footprint – Will act as a catalyst to accelerate grassroots marketing initiatives by leveraging existing stakeholder networks to create a positive network effect to attract new customers, employees, and business partners in the markets they are looking to expand into, while also serving as an intelligence source to reduce the risk of development.
3. Launch New Concepts – Will allow them to leverage their existing strong stakeholder relationships to introduce and launch new concepts while the dynamic 24/7 two-way conversation flow serves as a valuable feedback loop.