In this article, we will discuss the 10 best food stocks to buy according to hedge funds.
The food industry covers a wide range of businesses, including grocery stores, manufacturers, and non-alcoholic beverage companies. Many food-related stocks are classified as consumer staples, making them relatively resilient to economic downturns.
The food sector is among the world’s steadily growing industries. A report by Fortune Business Insights revealed that the global foodservice market was valued at $3.24 trillion in 2023 and is projected to nearly double to $6.35 trillion by 2032. This growth reflects a compound annual growth rate (CAGR) of over 7.5%.
The United States is a major player in this market, with its food service sector projected to reach $1.77 trillion by 2030. This significant growth can be attributed to the increasing popularity of fast food chains and a growing consumer appetite for convenient, on-the-go meals.
Emerging Trends in the Food Sector
Automation and digitalization are shaping the food industry in 2024, particularly in the restaurant and retail sectors. Due to labor shortages, a strategic approach to scalability in this industry involves a combination of human workforce and automation. With ongoing challenges like workforce gaps and inflation, these sectors are relying more on solutions such as self-checkout systems and AI-driven recommendations.
Upskilling initiatives, data-driven insights, and automation are helping businesses in the food industry improve efficiency and drive growth. The food industry automation market is expected to grow significantly, with projections estimating its value to reach $113.9 billion by 2031, reflecting a compound annual growth rate of 11%.
Companies in the food industry are also adjusting to changing consumer preferences by offering more healthy options and expanding into new markets. They’ve responded to the rise in demand for plant-based and organic products by introducing innovative new items to meet these evolving tastes.
Read Also: 7 Best Organic Food and Farming Stocks to Buy and 15 Largest Food Companies in the World by Market Cap.
Food Sector’s Resilience: Why It Remains a Strong Investment Choice?
Despite the potential challenge posed by the rise of weight-loss drugs, analysts remain confident in the long-term prospects of food companies. The food sector is considered a stable and dependable investment due to its consistent demand and resilience during economic downturns.
Sally Lyons Wyatt, a global EVP and Chief Advisor overseeing consumer goods and food service insights at Circana explained:
“We have started to see prices stabilize — they’re still 30% higher than 2019, but they’ve stabilized, and we’re not seeing the month-over-month double-digit increases. That is helping fuel what we think will be a bit of a rebound on volume — about a 1% increase on volume for food.”
Overall, the food industry has navigated recent economic challenges by implementing strong pricing strategies and maintaining solid brand loyalty. Investments in manufacturing and expanding product portfolios have also set these companies up for future growth. Moreover, the increasing global population presents a significant opportunity for further industry expansion. The Food & Beverage Select Industry Index returned nearly 5% since the start of 2024 and in the past 12 months, it delivered a nearly 12% return to shareholders.
Now that we’ve covered the broader food sector, key trends, and why it remains attractive for investors, let’s discuss the best food stocks to buy in 2024.
Photo by Lee Myungseong on Unsplash
Our Methodology
To narrow down the 10 best food stocks to buy according to hedge funds, we used Finviz and Yahoo Finance screeners to create a list of top food companies. From there, we selected the 10 stocks with the highest number of hedge fund investors, based on Insider Monkey’s database of over 900 prominent hedge funds as of Q3 2024. The best food stocks have been ranked in ascending order of the number of hedge funds holding stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Food Stocks To Buy According to Hedge Funds
10. Domino’s Pizza, Inc. (NYSE:DPZ)
Number of Hedge Fund Holders: 32
Domino’s Pizza, Inc. (NYSE:DPZ), founded in 1960, is a global leader in pizza delivery and carryout. In its latest earnings report, the company posted solid third-quarter results, with revenue increasing by 5.1% to $52.8 billion compared to Q3 2023, driven by higher order volumes. The company also expanded its reach by opening 72 net new stores.
Domino’s Pizza, Inc. (NYSE:DPZ) saw a 5% increase in income from operations, reflecting the effectiveness of its “Hungry for MORE” strategy, especially the “Renowned Value” focus. The CEO noted that this pillar will remain a key priority for the company.
Moreover, the company has strong cash reserves, generating $446.9 million in operating cash flow during the first three quarters of 2024. This marked a 5.9% increase from the same period in 2023. This growth was mainly driven by higher net income and increased advertising revenue. DPZ is one of the best food stocks to buy according to hedge funds.
Domino’s Pizza, Inc. (NYSE:DPZ) is also a solid dividend payer, having raised its payouts for 12 years in a row. In addition, the company’s 5-year average dividend growth rate comes in at nearly 18%. It currently offers a quarterly dividend of $1.51 per share and has a dividend yield of 1.37%, as of November 20.
9. US Foods Holding Corp. (NYSE:USFD)
Number of Hedge Fund Holders: 50
US Foods Holding Corp. (NYSE:USFD) is a leading food service distributor in the United States. Headquartered in Rosemont, Illinois, the company supplies a wide range of fresh, frozen, and dry food products to a diverse customer base, including restaurants, hospitals, hotels, and schools.
US Foods Holding Corp. (NYSE:USFD) is currently witnessing strong financial and operational growth. The company’s strategic acquisition of IWC Food Service, a distributor in Nashville, has expanded its market reach. During Q3 2024, the company achieved volume growth and gained market share with key customer groups, including independent restaurants, hospitality, and healthcare. Overall, volume increased by 3.8%, with independent restaurant cases rising by 4.1%. This marked the 14th consecutive quarter of market share gains for the company.
Regarding capital deployment, US Foods Holding Corp. (NYSE:USFD) was proactive in its share repurchase program, spending $580 million this quarter. Since launching the buyback program in late 2022, it has repurchased over $1.1 billion of its shares at an average price of $50.68. The company plans to continue share buybacks as it believes its stock is undervalued and remains committed to effective capital management.
The stock price reached a record high of $62.96 in October 2024, reflecting strong investor confidence during a significant turnaround and growth phase in a challenging market. Over the past year, the company’s share price has risen by over 55%, driven by its positive growth outlook.
8. Mondelez International, Inc. (NASDAQ:MDLZ)
Number of Hedge Fund Holders: 51
Mondelez International, Inc. (NASDAQ:MDLZ) is a giant in the global snacking industry and is currently operating in over 150 countries. The company leads the future of snacking with iconic brands like Oreo, Ritz, LU, Cadbury Dairy Milk, and Toblerone.
With its market leadership position in numerous snack categories across key markets, Mondelez International, Inc. (NASDAQ:MDLZ) has a globally diversified revenue stream. This makes the company less vulnerable to market fluctuations. As seen in its recent earnings release, the company has achieved organic revenue growth across all regions despite varying consumer trends among them.
Mondelez International, Inc. (NASDAQ:MDLZ) saw solid revenue growth with a positive volume mix in Q3 2024. In developed markets, sales grew in the mid-single digits, thanks to strong growth in North American biscuits and a recovery in Europe after raising prices. Emerging markets also grew in the mid-single digits, even with ongoing boycotts of Western brands in some areas. This strong profit growth allowed the company to continue its track record of generating strong free cash flow, reaching $2.5 billion so far this year.
Moreover, Mondelez International, Inc. (NASDAQ:MDLZ) also recently increased its quarterly dividend by 11%. This marked its 11th consecutive year of dividend growth, which makes MDLZ one of the best food stocks on our list. The company distributed $2.2 billion to shareholders in the form of cash dividends in Q2, amounting to $0.47 per share for the quarter.