It was easy to discount a company dedicated to selling high-end groceries in the midst of a terrible global downturn. And Whole Foods (NASDAQ: WFMI) has indeed suffered from investor fears. Shares of the company fell from year-ago levels of about $22 per share to lows of near $8 per share in the dark days of December 2008. They have since rebounded to the $22 level on green shoots speculation. On Monday, however, they tumbled again to $18.80. Is it time to buy?

That's a tricky question. First, the positives. Whole Foods is a well-managed grocery chain. It has been extremely disciplined in its expansion push, choosing good locations. It has also overcome relatively low revenues per employee by posting higher margins on items and much higher average cash register rings.

Call me sentimental, but there are many things I miss about my old stomping grounds of Cincinnati, Ohio. The trendy but well-run restaurants lining the Hyde Park neighborhood. Joseph-Beth, the best bookstore I've ever entered. Certain karaoke bars. Cincinnati chili, of course.

And Kroger. Yes, Kroger Co. (NYSE: KR), headquartered in the Queen City, is the top grocery chain in the country, but has no locations in Chicago. I miss its store-brand crackers, its salad bar, and occasionally, even its commercials.

Time was, we all felt rich. And we all felt entitled to spend money on ridiculous items at chocolate stores like Godiva, coffee shops like Starbucks (NYSE: SBUX) and, yes, upscale supermarkets like Whole Foods (NASDAQ:WFMI).

Those days are long gone, and even today's reduced expectations for this extremely well-run company are possibly too optimistic. EPS for 2008 were down 20% and company shares, floating in the $7-$10 range, are well off of 52-week highs.

This whole investing game is quite easy and predictable.

A hot new company goes public, attracts investors and its stock goes through the roof. Everyone wants all-in until the price reaches an unsustainable level, and then the selling begins.

Eventually either the hot company crashes and burns, or recovers to provide more rational returns in the future.

Whole Foods Market (NASDAQ: WFMI) is a great example of this evolution.

Five years ago, this alternative grocery store was all the rage. The stock appreciated as investors believed that shoppers would be more than willing to part with more dollars in order to get food that was naturally raised without chemicals and pesticides.

It doesn't take a genius to project that earnings reports will reflect slow retail sales activity in the last quarter of 2008.

In fact, reports in the last few days have, for the most part, reflected lower results than had been projected by the companies and the analysts following them.

The first read of the third-quarter results for Supervalu (NYSE: SVU) appeared to confirm that the company was performing consistent with the trends. SVU reported a loss of $13.95 per share, mostly resulting from a $3.3 billion charge for the writedown of goodwill and other intangible assets.

The reality is, however, that Supervalu is performing better than many of their competitors, such as Wal-Mart (NYSE: WMT), which reported sales and earnings well below expectations.

In its report to investors, SVU lowered its guidance for the full fiscal 2009 year to reflect the impact of higher commodity prices and cautious consumer spending.

When a stock comes in with earnings under analyst estimates, it usually gets punished. But in today's market any positive news is enough to keep shares in the green, and that is what we are seeing today with Safeway (NYSE: SWY) which is up strongly despite missing estimates for its third quarter.

First, let's get the bad news out of the way. Going into this morning's earnings announcement, analysts had been looking for earnings of 47 cents per share, but the company's actual earnings missed by a penny, with a reported 46 cents a share. With today's market environment, that in and of itself could have been enough to send shares crashing, but instead the stock is actually trading up 5.6% to $23.00, and earlier in the day was up as high as $23.75. Sounds crazy, but there is some good news to follow.

What the market is really interested in now is a company's forward looking estimate. Here the company showed real strength, and stood by its full year forecast of $2.25 to $2.35. Revenues during its third quarter were also strong, as the company showed revenues of $10.17 billion, verses estimates of $10.08 billion.

In tough financial times, certain food products and food preparation ideas seem to gain increasing favor with consumers. People try to find ways to prepare nutritious and interesting meals while gaining greater purchasing power from their hard-earned dollars.

Just the other day, some of us bloggers were engaged in a lively email chat regarding some of our tried-and-true strategies for stretching our grocery dollars. As you can guess, ramen noodles almost immediately took center stage. I was entertained with stories of the many ways that the slender pasta can be made quite appealing. For instance, if you take any brand of chunky salsa, cut it 50% with water, add a sliced hot dog and pour the heated mixture over the noodles, it's really a very delicious and satisfying meal.

As the discussion ebbed, I couldn't help but be amazed that no one had mentioned SPAM, by Hormel Foods Corp. (NYSE: HRL). Surely, I thought, these people must know about the illustrious history of SPAM! Could they ignore the fact that SPAM has carried literally millions of people though hard times since prior to World War II? Though there is probably a ratio of three SPAM jokes to every one SPAM recipe, the fact remains that Hormel's SPAM, in all its variations, still sells exceptionally well. It sells even better as times get tough, as indicated by a recent Associated Press overview.

• The average retail price of a dozen eggs went up 38% to $1.86 in November 2007 from a year earlier.
• The average cost for a gallon of milk rose 30% to $3.90.
• An average head of Iceburg lettuce rose 16.5% to 99 cents a pound .
• The average loaf of whole-wheat bread hit $2.67, up 12% on a year-over-year basis.
• Overall, food prices as indicated by the consumer price index jumped 5.3% on a seasonally adjusted annual basis through November, compared with a 2.4% increase through the entirety of 2006.

Shares in high-end grocery retailer Whole Foods (NASDAQ: WFMI) have slid around 20% since early November. The most obvious explanation for the pullback -- investors remain concerned that a weakening housing market and continued turmoil in the credit markets could result in a slowdown at Whole Foods.

However, the company is more resistant to these pressures than many investors realize. Americans have shown an increasing desire to eat healthier -- a trend that has allowed sales of organic foods to grow at three times the rate as those at conventional groceries. As the largest retailer of organic products, Whole Foods is well-positioned to benefit from this trend.

Moreover, while the company is the clear leader in the organic grocery niche, it's still a minnow compared to traditional grocery giants like Safeway and Kroger. With only around 200 stores spread across the U.S., the U.K. and Canada, Whole Foods still has plenty of untapped markets to expand into over the coming years.

Two additional factors are also weighing on the shares at the moment. The first is a general fear regarding the potential impact of increasing competition in the organic foods market. In recent years, traditional grocery chains have been adding to their selection of organic foods. At the same time, new entrants, such as Britain's Tesco, are also targeting the space more seriously. However, Whole Foods remains the undisputed leader in this market and offers the widest product selection. Furthermore, there's plenty of room for multiple competitors in this growing space.

Finally, the U.S. Federal Trade Commission (FTC) continues to pursue an antitrust case against Whole Foods' merger with rival Wild Oats Market. However, the FTC's case is weak and was strongly rejected by a judge earlier this year. The courts also rejected the government's attempts to block the merger pending an appeal -- Whole Foods has now completed the deal. It's highly unlikely that an appeals court will overturn the deal and break up the merger.

If you are interested in more analysis from Paul Tracy, you can find it at StreetAuthority.com