This article is part of our Rising Star Portfolio series.

Whole Foods Market's (NAS: WFM) fourth-quarter results contained a pinch of disappointment, but take any bearish sentiment with a grain of sea salt. The organic grocer is still going strong in the generally ugly, cutthroat grocery sector.

Fourth-quarter net income increased 31% to $75.5 million, or $0.42 per share. Revenue increased 12% over last year's third quarter to $2.4 billion, and same-store sales surged 8.7%. Although Whole Foods' revenue was a tad lighter than analysts' expectations, investors must remember these are perfectly decent numbers, especially given the difficult economic climate for grocers in general.

Compare Whole Foods' "disappointing" quarter to SUPERVALU's (NYS: SVU) most recent quarterly results. Revenue dropped 3%, and same-store sales fell 1.8%. Although supermarket giants Safeway (NYS: SWY) and Kroger (NYS: KR) boasted sales increases in their most recent quarterly announcements, they were not nearly as impressive as Whole Foods'.

Food inflation is a major cloud of future uncertainty that hovers over the grocery sector. Conventional grocers may end up in a race to the bottom when it comes to offering groceries at prices shoppers will be willing to pay.

Whole Foods faces similar challenges, of course, but its more affluent clientele tend to be more resilient in the face of economic difficulties. Most importantly, its more lofty missions help differentiate it from conventional rivals and low-price grocery peddlers such as Wal-Mart (NYS: WMT) .

And what about the fact that Whole Foods generated $66.3 million in free cash flow in the quarter, and announced its plan to boost its quarterly dividend by 40% to $0.14 per share? Seriously, folks, there's little to complain about here.

Whole Foods' competitive strengths made it a perfect fit for my Rising Star portfolio in May. Even though it currently trades at about 30 times forward earnings, its lofty mission, smart management, differentiated business, and room for future store growth give it a major advantage over supposedly "cheaper" grocery rivals' stocks. Whole Foods' traditionally premium price reflects a cartload of future growth potential.

If you want to follow the sector and its challenges, add these companies to your watchlist:

At the time this article was published Alyce Lomax owns shares of Whole Foods Market in her personal portfolio. The Motley Fool owns shares of SUPERVALU, Whole Foods Market, and Wal-Mart Stores. Motley Fool newsletter services have recommended buying shares of Wal-Mart Stores and Whole Foods Market. Motley Fool newsletter services have recommended buying calls in SUPERVALU. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. 

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