In this article, we will take a look at the 10 best coffee stocks to invest in.
The $100 billion coffee industry was one of the sectors hit hard by the pandemic-led recession, yet demand remained robust despite the global lockdowns. According to a survey conducted by the National Coffee Association (NCA), coffee sales soared in the first weeks of the lockdown, which began in March 2020, but plummeted by 15% in September, while online coffee revenue increased by 57%. Although 75 percent of coffee drinkers say the pandemic has not affected their coffee consumption, there is no doubt that specialty coffee consumption in coffee shops and restaurants has decreased during the worldwide lockdown.
Major coffee players are revamping their strategies all over the world to boost sales and increase their digital presence.
Last year was not a good year for fast-food giant McDonald’s Corporation (NYSE:MCD). But the Chicago-based McCafe operator is putting up a fight after reporting a 57% increase in second-quarter revenue to $5.9 billion, due to high demand for the BTS meal and a new chicken sandwich that drove same-store sales growth in the United States. McDonald’s Corporation (NYSE:MCD) said in November 2020 that it will invest $380 million in China to open 4,000 McCafes by 2023 to meet the growing local demand for premium coffee. Shares of McDonald’s Corporation (NYSE:MCD) climbed 16% in the last twelve months.
Starbucks Corporation (NASDAQ:SBUX) reported that mobile orders through the company’s app accounted for 25% of all transactions at Starbucks shops in the United States in the third quarter of 2021. The coffee giant’s third-quarter revenue grew 78% to $7.5 billion, beating estimates of $7.29 billion. Cold beverages such as Nitro cold brew accounted for nearly three-quarters of Starbucks Corporation’s (NASDAQ:SBUX) beverage sales. Shares of Starbucks Corporation’s (NASDAQ:SBUX) climbed 60% in the last twelve months.
Nestle S.A. (OTC:NSRGY) saw a 14.3% revenue increase to $3.5 billion in Nespresso products alone, as reported in the first half of 2021. Nestle S.A. (OTC:NSRGY) announced net sales of $46.3 billion for the first half of the year, with robust demand for Nespresso, Nescafé, and Starbucks products making up the majority of the organic growth. Nestle S.A. (OTC:NSRGY) stock has gained 7.1% in the last three months.
Among the biggest coffee companies that thrived during the pandemic are Yum China Holdings, Inc. (NYSE:YUMC), Monster Beverage Corporation (NASDAQ:MNST), and The J.M. Smucker Company (NYSE:SJM).
The J.M. Smucker Company (NYSE:SJM) saw a robust increase in demand after the pandemic. The company’s coffee segment accounted for $2.37 billion of the total revenue in 2021. Shares of The J.M. Smucker Company (NYSE:SJM) increased 16% in the last year. Meanwhile, shares of Yum China Holdings, Inc. (NYSE:YUMC) and Monster Beverage Corporation (NASDAQ:MNST) climbed 17% and 10%, respectively, in the last twelve months.
Although the post-pandemic environment has benefited coffee chains and consumer packaged goods producers, the International Coffee Organization (ICO) estimates that coffee prices will rise globally due to low supply and supply chain disruptions. With the availability of vaccines, the world’s coffee consumption is expected to climb by 1.9% to 167.2 million bags in 2020-2021, compared to 164.1 million bags in the year 2019-2020, according to ICO.
Just like the coffee industry, the hedge fund industry is also facing the shock of the pandemic. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and May 29th, 2021 our monthly newsletter’s stock picks returned 206.8%, vs. 91.0% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Pixabay/Public Domain
Our Methodology
The stocks on our list were picked based on their fundamentals and prospects for growth based on key business characteristics. We also took into account analysts’ ratings and hedge fund sentiment to pick out the stocks most popular among the hedge funds tracked by Insider Monkey.
Best Coffee Stocks to Invest In
10. Coffee Holding Co., Inc. (NASDAQ:JVA)
Number of Hedge Fund Holders: 2
We start our list of the best coffee stocks to invest in with Coffee Holding Co., Inc. (NASDAQ:JVA). The New York-based company was established in 1971 and began publicly trading in 2005. Coffee Holding Co., Inc. (NASDAQ:JVA) distributes organic and green coffee through its Wholesale Green Coffee, Private Label Coffee, and Branded Coffee.
In June, Coffee Holding Co., Inc. (NASDAQ:JVA) purchased its 50,000-square-foot roasting facility from the city of La Junta in Colorado. The purchase will support the firm’s operational performance and save over $100,000 in annual rent costs. Shares of Coffee Holding Co., Inc. (NASDAQ:JVA) increased 13% in the last month.
The company has a market cap of $33.05 million. In the first quarter of 2021, Coffee Holding Co., Inc. (NASDAQ:JVA) reported an EPS of $0.12, beating the $0.11 per share EPS of the same period in 2020. The company’s revenue in the first quarter came in at $18.13 million, a decrease from $19.26 million in the same period of 2020. However, the company expects to see a restoration of positive quarter-over-quarter revenue growth as businesses continue to reopen. Shares of Coffee Holding Co., Inc. (NASDAQ:JVA) rose 98% in the last twelve months.
By the end of the first quarter of 2021, 2 hedge funds out of the 866 tracked by Insider Monkey held stakes in Coffee Holding Co., Inc. (NASDAQ:JVA), worth roughly $3.90 million.
9. Nestle S.A. (OTC: NSRGY)
Number of Hedge Fund Holders: 4
Nestle S.A. (OTC:NSRGY) ranks 9th on the list of 10 best coffee stocks to invest in. The Switzerland-based food and beverage company offers various products such as pharmaceuticals products, frozen food, pet products, and coffee products through its Nespresso and Nescafe brands. Nestle S.A.’s (OTC:NSRGY) products are being offered in over 190 countries worldwide.
Earlier this year, Nestle S.A. (OTC:NSRGY) announced a partnership with Starbucks Corporation (NASDAQ:SBUX). The coffee giants are set to develop Starbucks ready-to-drink (RTO) beverages that will be distributed in Southeast Asia, Oceania, and Latin America. The collaborated brew is set to hit the market in 2022.
On July 2nd, Deutsche Bank analyst Tom Sykes raised Nestle S.A.’s (OTC:NSRGY) price target to $130 per share from $115 per share and kept a Hold rating on the stock. Shares of Nestle S.A. (OTC:NSRGY) rose 7% year to date.
The company has a market cap of $357.20 billion. In the first quarter of 2021, Nestle S.A.’s (OTC:NSRGY) revenue came in at $23 billion, up 2.1% from $22.67 in the same period of 2020.
Just like Restaurant Brands International (NYSE:QSR), Keurig Dr Pepper Inc. (NASDAQ:KDP), Starbucks Corporation (NASDAQ:SBUX), McDonald’s Corporation (NYSE:MCD), Monster Beverage Corporation (NASDAQ:MNST), Yum China Holdings, Inc. (NYSE:YUMC) and The J.M. Smucker Company (NYSE:SJM), Nestle S.A. (OTC:NSRGY) is one of the best coffee stocks to buy now.
There were 4 hedge funds that reported owning stakes in Nestle S.A. (OTC:NSRGY) at the end of the first quarter. The total value of these stakes at the end of Q1 is $1.64 billion.
8. Farmer Brothers Company (NASDAQ:FARM)
Number of Hedge Fund Holders: 10
Farmer Brothers Company (NASDAQ:FARM) ranks 8th on the list of 10 best coffee stocks to invest in. The Texas-based food service company was founded in 1912 and specializes in the production of coffee and tea. Farmer Brothers Company (NASDAQ: FARM) has over 110 local branches.
In April, Farmer Brothers Company (NASDAQ:FARM) completed a new $127.5 million, four-year financing deal that includes an $80.0 million revolving credit facility and a $47.5 million term loan due April 2025. The deal increased the borrowing capacity of the company. Shares of Farmer Brothers Company (NASDAQ:FARM) rose 109% year to date.
In March, B. Riley Securities analyst Kara Anderson upgraded Farmer Brothers Company (NASDAQ:FARM) to a Buy rating from a Neutral rating and with a $12.50 per share price target. The analyst commented that the re-opening of important states is in favor of the company’s recovery.
Just like Keurig Dr Pepper Inc. (NASDAQ:KDP), Restaurant Brands International (NYSE:QSR), Starbucks Corporation (NASDAQ:SBUX), Nestle S.A. (OTC:NSRGY), McDonald’s Corporation (NYSE:MCD), Monster Beverage Corporation (NASDAQ:MNST), Yum China Holdings, Inc. (NYSE:YUMC) and The J.M. Smucker Company (NYSE:SJM), Farmer Brothers Company (NASDAQ:FARM) is one of the best coffee stocks to buy now.
The company has a market cap of $174.48 million. In the fiscal third quarter of 2021, Farmer Brothers Company (NASDAQ:FARM) reported an EPS of $0.78, missing estimates of $2.32 in the same period of 2020. The company’s revenue in the fiscal third quarter was $93.15 million, a decrease from $129.14 million in the same period of 2020. However, the company is positive that sales will return to pre-pandemic levels as the world continues to recover and the reported quarter sales were the most stable results since the pandemic. Shares of Farmer Brothers Company (NASDAQ:FARM) have gained 103% in the last twelve months.
There were 10 hedge funds that reported owning stakes in Farmer Brothers Company (NASDAQ:FARM) at the end of the first quarter. The total value of these stakes at the end of Q1 is $27.53 million.
Choice Equities Capital Management mentioned Farmer Brothers Company (NASDAQ:FARM) in its Q1 2021 investor letter. Here is what the fund said:
“FARM – One of those other new holdings is Farmer Brothers, Inc., though this one seems to offer higher upside if our expectations of improvement in profitability prove to be on the mark. As one of just six coffee roasters and distributors in the United States, the longtime family run company has produced reliable profits for most of its 100-year existence. But the last few years have certainly been trying. Beginning in 2018, prior management bungled a sorely needed transition from its severely antiquated roasting facilities, resulting in stockouts, cost overruns and a general inability to get coffee beans to its end
customers in a dependable and cost-efficient manner. After the missteps, and perhaps some infighting on the future direction of the company from third-generation family members who once held meaningful ownership positions, it appears the board eschewed the family’s input and opted to go the route of becoming a professionally run company run for public shareholders…” (Click here to see the full text)
7. Restaurant Brands International (NYSE:QSR)
Number of Hedge Fund Holders: 26
Restaurant Brands International (NYSE:QSR) ranks 7th on the list of 10 best coffee stocks to invest in. The Georgia-based food and beverage conglomerate is the owner of many food chains such as Burger King and Popeye’s. Restaurant Brands International (NYSE:QSR) also purchased Canadian coffee shop Tim Hortons in 2014.
Earlier this year, Tim Hortons invested over $63 million to enhance their products and launch more products on their menu. Shares on Restaurant Brands International (NYSE:QSR) jumped 18% over the last twelve months.
On August 3rd, Deutsche Bank analyst Brian Mullan raised Restaurant Brands International’s (NYSE:QSR) price target to $81 per share from $79 previously and kept a Buy rating. The analyst mentioned that he favors the stock’s risk/reward ratio.
The company has a market cap of $30.92 billion and offers a dividend yield of 3.17%. The company reported a second-quarter adjusted EPS of $0.77, beating consensus EPS of $0.61. Restaurant Brands International’s (NYSE:QSR) revenue was $1.44 billion, beating consensus estimates of $1.15 billion.
Just like Keurig Dr Pepper Inc. (NASDAQ:KDP), Starbucks Corporation (NASDAQ:SBUX), Nestle S.A. (OTC:NSRGY), McDonald’s Corporation (NYSE:MCD), Monster Beverage Corporation (NASDAQ:MNST), and Yum China Holdings, Inc. (NYSE:YUMC), Restaurant Brands International’s (NYSE:QSR) is one of the best coffee stocks to buy now.
By the end of the first quarter of 2021, 26 hedge funds out of the 866 tracked by Insider Monkey held stakes in Restaurant Brands International (NYSE:QSR), worth roughly $2.25 billion.
Pershing Square Holdings Ltd mentioned Restaurant Brands International (NYSE:QSR) in its Q4 2020 investor letter. Here is what the fund said:
“QSR’s franchised business model is a high-quality, capital-light, growing annuity that generates high-margin brand royalty fees from three leading brands: Burger King, Tim Hortons and Popeyes. The company nimbly navigated difficult market conditions in 2020 by assisting franchisees, while maintaining its long-term growth potential.
As the COVID-19 pandemic began, management undertook a series of steps to secure and strengthen the business. The company quickly bolstered safety procedures and shifted marketing spend to highlight the off -premise options available to customers, while supporting its franchisees with fee/cap ex deferrals and liquidity programs. Throughout the year, the company accelerated its digital investments by expanding its delivery footprint, modernizing its drive-thru experience, increasing mobile ordering adoption, and improving its loyalty programs. (Click here to see the full text)
6. Keurig Dr Pepper Inc. (NASDAQ:KDP)
Number of Hedge Fund Holders: 30
Ranking 6th in the list of best coffee stocks to invest in is beverage maker Keurig Dr Pepper Inc. (NASDAQ:KDP). The Texas-based company was formerly known as Keurig Green Mountain and was founded in 2018. Keurig Dr Pepper Inc. (NASDAQ:KDP) offers over 125 brands including Green Mountain Coffee Roasters and The Original Donut Shop.
In 2020, Keurig Dr Pepper Inc. (NASDAQ:KDP) purchased caffeinated sparkling water manufacturer Limitless. The acquisition will help broaden the availability of Limitless items which are already being sold in Walmart Inc. (NYSE:WMT). Shares of Keurig Dr Pepper Inc. (NASDAQ:KDP) rose 14% in the last twelve months.
In June, Wells Fargo analyst Chris Carey upgraded Keurig Dr Pepper Inc. (NASDAQ:KDP) to an Overweight rating from an Equal Weight rating with a $42 per share price target. Keurig Dr Pepper Inc. (NASDAQ:KDP) was also upgraded by JPMorgan analyst Andrea Teixeira to an Overweight rating from a Neutral rating with a $39 per share price target.
The company has a market cap of $48.75 billion and offers a dividend yield of 2.18%. In the second quarter of 2021, Keurig Dr Pepper Inc. (NASDAQ:KDP) reported an adjusted EPS of $38, beating estimates by $0.01. The company’s second-quarter 2021 revenue came in at $3.14 billion, beating the consensus estimates of $3.05 billion.
Just like Restaurant Brands International (NYSE:QSR), Starbucks Corporation (NASDAQ:SBUX), Nestle S.A. (OTC:NSRGY), The J.M. Smucker Company (NYSE:SJM), McDonald’s Corporation (NYSE:MCD), Monster Beverage Corporation (NASDAQ:MNST) and Yum China Holdings, Inc. (NYSE:YUMC), Keurig Dr Pepper Inc. (NASDAQ:KDP) is one of the best coffee stocks to buy now.
At the end of the first quarter of 2021, 30 hedge funds in the database of Insider Monkey held stakes worth $934 million in Keurig Dr Pepper Inc. (NASDAQ:KDP).
ClearBridge Investments mentioned Keurig Dr Pepper Inc. (NASDAQ:KDP) in its Q1 2021 investor letter:
“Our underweights in health care and staples contributed to relative performance during the period. We also prefer to act with some caution in a sector where regulatory risks persist. In consumer staples, we are broadly finding valuations uncompelling and sold Keurig Dr Pepper during the quarter.”
5. The J.M. Smucker Company (NYSE:SJM)
Number of Hedge Fund Holders: 33
The J.M. Smucker Company (NYSE:SJM) ranks 5th on the list of 10 best coffee stocks to invest in. The food and beverage manufacturer based in Ohio distributes coffee through its notable brands Folgers, Bustelo, and the Dunkin’ Donuts range. In 2021, The J.M. Smucker Company (NYSE:SJM) reported over $2.37 billion in retails coffee sales.
In July, The J.M. Smucker Company (NYSE:SJM) increased its quarterly dividend to $0.99, a 10% increase from $0.90 per common share, which marks the 20th year in a row that the dividend has increased. Shares of The J.M. Smucker Company (NYSE:SJM) rose 18% in the last twelve months.
On June 4th, Stifel analyst Christopher Growe raised The J.M. Smucker Company’s (NYSE:SJM) price target to $135 from $125 and kept his Hold rating on the stock. The analyst mentioned that the company’s balance sheet remains solid.
The company has a market cap of $14.23 billion and offers a dividend yield of 3.02%. In the fiscal fourth quarter of 2021, The J.M. Smucker Company’s (NYSE:SJM) reported an EPS of $1.89, beating estimates of $1.67 per share. In the fiscal fourth quarter, the company’s revenue was $1.92 billion, beating revenue estimates by $0.04 billion.
At the end of the first quarter of 2021, 33 hedge funds in the database of Insider Monkey held stakes worth $689 million in The J.M. Smucker Company’s (NYSE:SJM).
Roubaix Capital LLC mentioned J.M. Smucker Company’s (NYSE:SJM) in its Q4 2020 investor letter:
“Companies including J.M Smucker Company (SJM) have seen their sales accelerate to unsustainable levels that are not consistent with their mature end markets. We expect sales to slow and eventually give back some of the one-time gains caused by the unusual circumstances of 2020. Further, we question the sustainability of current peak valuations in the face of likely peak sales. We believe companies with such characteristics could face a combination of negative earnings revisions and lower valuations as the demand reality sets in this year. We also anticipate that companies that have benefited from consumers being homebound will see very challenging comparisons in 2021. No doubt, spending on home improvement and furnishing grew at unsustainable rates in 2020.”
4. Yum China Holdings, Inc. (NYSE:YUMC)
Number of Hedge Fund Holders: 34
Yum China Holdings, Inc. (NYSE:YUMC) ranks 4th on the list of 10 best coffee stocks to invest in. The Texas-based fast-food restaurant operator was founded in 2016. Yum China Holdings, Inc. (NYSE:YUMC) operates restaurant brands such as KFC, Pizza Hut, Taco Bell, and COFFii & JOY.
In 2020, Yum China Holdings, Inc. (NYSE:YUMC) entered a partnership with Italian coffee company Lavazza Group. Yum China Holdings, Inc. (NYSE:YUMC) will help Lavazza expand its operations in China, where they have already launched their first flagship store outside of Italy in Shanghai. Yum China Holdings, Inc. (NYSE:YUMC) has soared 18% in the last twelve months.
Goldman Sachs analyst Michelle Cheng raised Yum China Holdings, Inc.’s (NYSE:YUMC) price target to $77 from $74 per share and kept his Buy rating. The analyst mentioned that she is confident of store recoveries from strong proven management track records.
The company has a market cap of $26.03 billion and offers a dividend yield of 0.78%. In the second quarter of 2021, Yum China Holdings, Inc. (NYSE:YUMC) reported an adjusted EPS of $0.42, missing estimates of $0.44. The company’s second-quarter revenue came in at $2.45 billion, a 29% increase from the same period of 2020.
There were 34 hedge funds that reported owning stakes in Yum China Holdings, Inc. (NYSE:YUMC) at the end of the first quarter. The total value of these stakes at the end of Q1 is $975 million.
3. Monster Beverage Corporation (NASDAQ:MNST)
Number of Hedge Fund Holders: 45
Monster Beverage Corporation (NASDAQ:MNST) ranks 3rd on the list of 10 best coffee stocks to invest in. The California-based beverage company manufactures energy drinks, through its brands such as Monster Energy, Muscle Monster, Mega Monster, and its coffee brand Java Monster.
On August 3rd, Deutsche Bank analyst Steve Powers raised Monster Beverage Corporation’s (NASDAQ:MNST) price target to $108 from $105 per share and kept his Buy rating on the stock. On July 23rd, the stock was also upgraded by Citi analyst Wendy Nicholson to a Buy rating from a Neutral rating with a $110 price target.
The company has a market cap of $49.35 billion. In the first quarter of 2021, Monster Beverage Corporation (NASDAQ:MNST) reported an EPS of $0.59, missing estimates by $0.02. However, the company’s first-quarter revenue was $1.24 billion, beating revenue estimates by $0.02 billion. Shares of MNST jumped 19% over the last twelve months.
There were 45 hedge funds that reported owning stakes in Monster Beverage Corporation (NASDAQ:MNST) at the end of the first quarter. The total value of these stakes at the end of Q1 is $2.38 billion.
2. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 61
Starbucks Corporation (NASDAQ:SBUX) ranks 2nd on the list of 10 best coffee stocks to invest in. The Washington-based multinational company operates coffeehouses and roastery reserves worldwide. Starbucks Corporation (NASDAQ:SBUX) is one of the best coffee stocks with over 32,938 retail locations in over 70 countries.
In May, Starbucks Corporation (NASDAQ:SBUX) partnered with clean energy provider Generate. Generate will provide solar energy to local Starbucks stores and up to 24,000 households. Shares of Starbucks Corporation (NASDAQ:SBUX) jumped 4% in the last three months.
On August 3rd, MKM Partners analyst Brett Levy raised Starbucks Corporation’s (NASDAQ:SBUX) price target to $132 per share from $125 per share and kept his Neutral rating on the stock. According to the analyst, Starbucks Corporation (NASDAQ:SBUX) continues to advance into its long-term agenda.
The company has a market cap of $141.93 billion and offers a dividend yield of 1.50%. Starbucks Corporation’s (NASDAQ:SBUX) fiscal third-quarter EPS was $1.01, beating consensus estimates of $0.77. Starbucks Corporation’s (NASDAQ:SBUX) revenue in the fiscal third quarter of 2021 was $7.5 billion, beating estimates of $7.24 billion.
By the end of the first quarter of 2021, 61 hedge funds out of the 866 tracked by Insider Monkey held stakes in Starbucks Corporation (NASDAQ:SBUX), worth roughly $4.44 billion.
Wedgewood Partners mentioned Starbucks Corporation (NASDAQ:SBUX) in its Q1 2021 investor letter:
“Starbucks reported comparable store sales that grew +9% in the U.S. (and up +11% compared to 2019) and up substantially in China as the Company lapped the effects of the pandemic in the region. Starbucks’ financial strength continues to enable investment in store growth, alternative formats, drive-throughs, plus technology to drive higher throughput and further distance itself from smaller, fragmented local and regional competitors that have struggled over the past year. Starbucks has opened over 1000 net new stores over the past 12 months in its international market, primarily in China where it grew its footprint by a double-digit percentage, despite the various obstacles posed by the pandemic. Starbucks will continue to distance itself from competitors and will experience solid growth in the nascent Chinese market while optimizing its more mature U.S. market to drive productivity gains.”
1. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 67
Topping the list of 10 best coffee stocks to invest in is American fast food company McDonald’s Corporation (NYSE:MCD). The Illinois-based leading foodservice retailer was founded in 1940 and has over 31,000 restaurants located in 119 countries. McDonald’s Corporation (NYSE:MCD) is one of the best coffee stocks to invest in with over 15,000 McCafe outlets worldwide.
In 2019, McDonald’s Corporation (NYSE:MCD) acquired AI-company Apprente. The acquisition supports the company’s customer experience by bolstering its digital, drive-thru, and delivery offerings.
On August 3rd, RBC Capital analyst Christopher Carril raised McDonald’s Corporation (NYSE:MCD) price target to $268 from $263 and kept his Outperform rating on the stock, highlighting the company’s positive Q2 results. The stock has gained 23% in the last twelve months. Shares of MCD also increased 11% in the year to date.
The company has a market cap of $179.16 billion and currently offers a dividend yield of 2.15%. In the second quarter of 2021, McDonald’s Corporation (NYSE:MCD) reported an adjusted EPS of $2.37, beating estimates by $0.26. The company’s second-quarter revenue was $5.89 billion, beating consensus estimates of $5.53 billion.
At the end of the first quarter of 2021, 67 hedge funds in the database of Insider Monkey held stakes worth $3.78 billion in McDonald’s Corporation (NYSE:MCD).
Horizon Kinetics LLC mentioned McDonald’s Corporation (NYSE:MCD) in its Q1 2021 investor letter. Here is what the fund said:
“We were asked about the attractiveness of some well-established, low-price-point restaurant chain, like McDonald’s. It would seem to be a high-quality name for maybe a consumer-income-constrained world. The share price had dropped in lock step with the S&P 500. The problem is that inflation isn’t evenly applied. If it were, if all prices and salaries and rents rose by the same percentage, it’s not a problem. But what if McDonald’s input costs, like wages and rents, as well as the prices it charges its customers, are all rising at a 6% annual rate, but suddenly the cost of beef rises by 12%; and the cost of corn syrup for soda? Food and packaging are roughly 30% of a fast food restaurant’s costs. That could seriously diminish profit margins.
A better business model for such an environment might be a food processor like Archer Daniels Midland. The country can’t exist without an ADM. It would be difficult to have a balanced dinner without some ADM product on your plate, whether it’s the vegetable oil in the salad dressing, the protein meal that fed the chicken, the wheat flour and yeast in your bread, the citric acid in the spice rub, or the probiotics in your health drink. The company has its own trucks, railroad cars, river barges and ocean-going vessels…” (Click here to see the full text)
You can also take a peek at 12 Best Bear Market Stocks to Buy Now and 15 Best Warren Buffett Stocks to Buy Now.
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Disclosure: None. 10 Best Coffee Stocks to Invest In is originally published on Insider Monkey.
