In this article, we will be looking at the 10 best grocery stocks to buy.
The global grocery shopping and food retail business has always been one of the largest markets globally. As long as we are alive, we will need food and other products to keep ourselves healthy and well cared for. According to a report published by Grand View Research, the global food and grocery retail market alone was worth about $11.7 trillion in 2019.
The coronavirus pandemic did impact even the grocery sector, but for this sector, the impact was more varied than for others. With the imposition of nationwide lockdowns and travel bans, suffice it to say that supply chains and distribution of goods were certainly disrupted, leading to losses for all businesses. However, it seems as if the grocery retail sector could weather the storm better than the others. For example, according to eMarketer, the online grocery shopping sector grew 54% in 2020 to reach about $95.8 billion. Online grocery sales were also said to have made up 74% of all grocery sales in the US for 2020.
For example, Walmart Inc (NYSE: WMT) saw a whopping 79% jump in its digital sales in the quarter ended on October 31.
So even though lockdowns were in place, the fact that people needed more groceries in light of restaurants closing meant that they not only made more trips to grocery stores but started adapting to the online grocery shopping experience as well.
Online and traditional grocery shopping has resulted in the global grocery retail market being expected to grow exponentially in the future. According to Grand View Research, the market size for the global food and grocery retail market is due to reach $17.3 trillion by 2027, increasing at a CAGR of 5% during the forecasted time period. During the same time period, the online distribution channel of grocery and food products is also expected to grow at a CAGR of 6.2%, mostly because more people are opting for e-commerce during the pandemic stay-at-home restrictions and convenience.
All in all, the grocery retail sector can be expected to remain in fashion for years to come since there will always be a need for groceries as long as humans exist. This may be why big companies such as Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc. (NASDAQ: GOOG), and Shopify Inc. (NYSE: SHOP) are moving into the grocery sector. Amazon.com, Inc. (NASDAQ: AMZN) provides grocery shopping and delivery services to its customers. At the same time, Alphabet Inc. (NASDAQ: GOOG) has partnered with other companies like Albertsons to bring innovative tech to the online grocery sector.
Finally, Shopify Inc. (NYSE: SHOP) allows you to set up your own grocery store on its platform to sell to a vast consumer base online. As such, we have compiled a list of the best grocery stocks to buy based on hedge fund popularity and their growth in the past, alongside their potential to grow even further.
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Without further ado, let’s take a look at the 10 best grocery stocks to buy.
10. Metro Inc. (OTCMKTS: MTRAF)
Number of Hedge Fund Holders: N/A
Metro Inc. (OTCMKTS: MTRAF) is a Canadian retailer in the food and pharmaceutical sectors, with stores under the brands of Metro, Metro Plus, Super C, and others. The company operates food stores, supermarkets, and discount stores to provide fresh grocery products such as baked goods, prepared foods, meats, general merchandise, and a range of other products. It ranks 10th on our list of the best grocery stocks to buy.
This January, Metro Inc. (OTCMKTS: MTRAF) announced that its online food sales rose by 170% in the first quarter of 2021. The company also had an adjusted EPS valued at $0.64 and brought in revenue valued at $3.35 billion, representing a 6.2% growth year over year. It has a gross profit margin of 12.13% and has gained 7.48% in the past 6 months and 6.5% year to date.
Like Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc. (NASDAQ: GOOG), and Shopify Inc. (NYSE: SHOP), this is a good stock to invest in.
9. Casey’s General Stores, Inc. (NASDAQ: CASY)
Number of Hedge Fund Holders: 11
Casey’s General Stores, Inc. (NASDAQ: CASY) is a company that operates convenience stores under the Casey’s and Casey’s General Store brands. The company provides food, nicotine, health and beauty aid, and automotive products alongside a range of others. It ranks 9th on our list of the best grocery stocks to buy.
In June, BMO Capital raised its price target on Casey’s General Stores, Inc. (NASDAQ: CASY) from $185 to $200, while retaining its Market Perform rating on the shares. The month before, Casey’s General Stores, Inc. (NASDAQ: CASY) acquired Buchanan Energy and brought the Bucky’s Convenience Stores chain under its wing to solidify its presence in the Midwest. The company now operates over 2,300 stores. In March, it also announced that it would be acquiring 49 Oklahoma stores from Circle K Stores for about $39 million. In the first quarter of 2021, the company’s EPS was valued at $3.24 versus estimates of $2.06, and its revenue was valued at $2.11 billion. The company’s gross profit margin is 27.06%, and it has gained 11.56% in the past 6 months and 11.74% year to date.
By the end of the first quarter of 2021, 11 hedge fund held stakes in Casey’s General Stores, Inc. (NASDAQ: CASY), valued at roughly $96.5 million. This is compared to 23 hedge fund holders in the previous quarter with a total stake value of roughly $120 million. Like Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc. (NASDAQ: GOOG), and Shopify Inc. (NYSE: SHOP), this is a good stock to invest in.
Artisan Partners, a high value-added investment management firm, mentioned Casey’s General Stores, Inc. (NASDAQ: CASY) in their first-quarter 2021 investor letter. Here’s what they said:
“Casey’s General Stores, akin to 7-Eleven, engages in the management and operation of convenience stores and gasoline stations serving rural customers throughout the Midwest. A new leadership team took over in 2019 and has since laid out a plan to transition Casey’s to a modern-day retailer. To make this transition, management has a long list of initiatives: procurement savings (merchandise and food ingredients), increased private label penetration, labor cost optimization, a loyalty program and frozen beverages. While the company has been impacted by decreased in-store traffic since the pandemic began, we believe it is well-positioned to excel throughout the course of this year as store traffic rebounds alongside an increase in COVID-19 vaccination rates. Given these strong internal and external tailwinds, we increased our position size during the quarter.”
8. BJ’s Wholesale Club Holdings, Inc. (NYSE: BJ)
Number of Hedge Fund Holders: 14
BJ’s Wholesale Club Holdings, Inc. (NYSE: BJ) operates warehouse clubs in the US and offers perishables, edible grocery, general merchandise, and non-edible grocery products. The company ranks 8th on our list of the best grocery stocks to buy.
This May, MKM Partners raised its price target on BJ’s Wholesale Club Holdings, Inc. (NYSE: BJ) from $39 to $41, while Baird also raised its price target on the stock to $54 and holds an Outperform rating on the shares. For the fiscal first quarter of 2021, BJ’s Wholesale Club Holdings, Inc.’s (NYSE: BJ) EPS was valued at $0.69, beating estimates by $0.32. Its revenue was $3.8 billion, representing a 20.82% growth year over year and beating estimates by$472.59 million. The company’s gross profit margin is 19.15%, and it has gained 19.86% in the past 6 months and 22.66% year to date. It has a consensus Buy rating according to the Wall Street Journal.
By the end of the first quarter of 2021, 14 hedge fund holders held stakes in BJ’s Wholesale Club Holdings, Inc. (NYSE: BJ), valued at roughly $135 million. This is compared to 25 hedge fund holders in the previous quarter with a total stake value of roughly $239 million. Like Walmart Inc (NYSE: WMT), Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc. (NASDAQ: GOOG), and Shopify Inc. (NYSE: SHOP), this is a good stock to invest in.
ClearBridge Investments, an investment management firm, mentioned BJ’s Wholesale Club Holdings, Inc. (NYSE: BJ) in their first-quarter 2021 investor letter. Here’s what they said:
“In addition to the new issue market, we have been tactically adding growth exposure. To make room for these new names with more attractive outlooks related to the reopening, we sold out of companies where the thesis is not playing out at the pace we expected including BJ’s Wholesale Club.”
7. Sprouts Farmers Market, Inc. (NASDAQ: SFM)
Number of Hedge Fund Holders: 21
Sprouts Farmers Market, Inc. (NASDAQ: SFM) offers fresh, natural, and organic food and grocery products to consumers in the US. The company operates primarily through its Healthy Grocery Stores segment, and it ranks 7th on our list of the best grocery stocks to buy.
In the first quarter of 2021, Sprouts Farmers Market, Inc. (NASDAQ: SFM) had an EPS valued at $0.7, beating estimates by $0.1. The company also brought in revenue valued at $1.58 billion. It has a forward PE ratio of 13.6 and a gross profit margin of 37.19%. Sprouts Farmers Market, Inc. (NASDAQ: SFM) has gained 32.97% in the past 6 months and 33.37% year to date.
By the end of the first quarter of 2021, 21 hedge fund holders held stakes in Sprouts Farmers Market, Inc. (NASDAQ: SFM), valued at roughly $404 million. This is compared to 25 hedge fund holders in the previous quarter with a total stake value of roughly $393 million. Like Walmart Inc (NYSE: WMT), Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc. (NASDAQ: GOOG), and Shopify Inc. (NYSE: SHOP), this is a good stock to invest in.
Appleseed Fund, an investment management firm, mentioned Sprouts Farmers Market, Inc. (NASDAQ: SFM) in their first-quarter 2021 investor letter. Here’s what they said:
“Our most significant contributors to the Fund’s equity performance during the quarter (includes) Sprouts Famers Markets (SFM). Sprouts has benefited from the market slowly recognizing that the company’s growth last year was only driven in part by lockdowns; the company should enjoy strong growth through market share gains for years to come. Sprouts’ unique value proposition as a particularly attractive store in which shoppers can find a wide assortment of organic and natural produce should benefit shareholders and consumers alike.”
6. The Kroger Co. (NYSE: KR)
Number of Hedge Fund Holders: 35
The Kroger Co. (NYSE: KR) is an American retailer operating food and drug stores alongside multi-department stores, marketplace stores, and price impact warehouses. The company also manufactures and processes its food products for sale in supermarkets. It ranks 6th on our list of the best grocery stocks to buy.
This June, Deutsche Bank raised its price target on The Kroger Co. (NYSE: KR) from $36 to $41, while on June 17th, the CEO of The Kroger Co. (NYSE: KR) commented that its business was growing because of new eating habits post-pandemic lockdowns. The company also offered profit guidance with an EPS of $2.95 to $3.1 for 2021, versus the $2.83 consensus. For the fiscal first quarter of 2021, The Kroger Co.’s (NYSE: KR) EPS was $1.22, beating estimates by $0.08, and its revenue was $41.55 billion, representing an 11.54% growth year over year and beating estimates by $570.7 million. The company has a forward PE ratio of 12.8 and a gross profit margin of 23.48%. It has gained 24.29% in the past 6 months and 21.97% year to date.
By the end of the first quarter of 2021, 35 hedge funds held stakes in The Kroger Co. (NYSE: KR), valued at roughly $3.15 billion. This is compared to 36 hedge fund holders in the previous quarter with a total stake value of roughly $2.38 billion. Like Walmart Inc (NYSE: WMT), Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc. (NASDAQ: GOOG), and Shopify Inc. (NYSE: SHOP), The Kroger Co. (NYSE: KR) is a good stock to invest in.
5. Bunge Limited (NYSE: BG)
Number of Hedge Fund Holders: 44
Bunge Limited (NYSE: BG) is an agribusiness and food company operating across the globe. It has five segments: Agribusiness, Edible Oil Products, Milling Products, Fertilizer, and Sugar and Bioenergy segments. It provides its products to various customers, including food manufacturers, grocery chains, wholesalers, distributors, and others. The company ranks 5th on our list of the best grocery stocks to buy.
This May, Bunge Limited (NYSE: BG) announced a dividend of $0.525 per share, bringing a 5% increase from its previous $0.5 dividend. The new dividend has a forward yield of 2.45% and will be payable by September 2nd. In the first quarter of 2021, Bunge Limited (NYSE: BG) had EPS valued at $3.13, beating estimates by $1.59, and its revenue came in at $12.96 billion, representing a 41.3% growth year over year and beating estimates by $2.68 billion. The company has a forward PE ratio of 10.2, and it has a gross profit margin of 8.32%. The stock has gained 24.34% in the past 6 months and 21.73% year to date.
By the end of the first quarter of 2021, 44 hedge fund holders held stakes in Bunge Limited (NYSE: BG), valued at roughly $653 million. This is compared to 51 hedge fund holders in the previous quarter with a total stake value of roughly $936 million.
4. Pinduoduo Inc. (NASDAQ: PDD)
Number of Hedge Fund Holders: 56
Pinduoduo Inc. (NASDAQ: PDD) is a Chinese company operating an e-commerce platform in China. The mobile platform Pinduoduo offers various products, including food and beverages and fresh produce or grocery products. The company ranks 4th on our list of the best grocery stocks to buy.
In the first quarter of 2021, Pinduoduo Inc. (NASDAQ: PDD) had EPS valued at -$0.24, beating estimates by $0.14, and its revenue was valued at $3.47 billion, representing a 278.06% growth year over year and beating estimates by $269.66 million. It has a gross profit margin of 62.47% and has gained 43.92% in the past year. The stock has a consensus Buy rating according to the Wall Street Journal.
By the end of the first quarter of 2021, 56 hedge fund holders held stakes in Pinduoduo Inc. (NASDAQ: PDD), valued at roughly $6.29 billion. This is compared to 54 hedge fund holders in the previous quarter with a total stake value of roughly $10.5 billion.
Tao Value, an investment management firm, mentioned Pinduoduo Inc. (NASDAQ: PDD) in its first-quarter 2021 investor letter. Here’s what they said:
“Pinduoduo reported a strong quarter, reporting MAU of 720 million, now surpassing Taobao. However, it was overshadowed by a bigger news on Colin Huang resigning from Board and completely disassociating himself from PDD’s management & operation. Huang explained in his letter to shareholders that he would start fundamental research initiatives in food science. Although not entirely shocked (as he already stepped down from CEO July 2020), I am surprised by the fast pace of such transition. I remain confident in the organization and the culture Huang built but will monitor it closely.”
3. Walmart Inc. (NYSE: WMT)
Number of Hedge Fund Holders: 58
Walmart Inc. (NYSE: WMT) is an American retailer and wholesaler operating across the globe. The company has three segments, namely Walmart U.S., Walmart International, and Sam’s Club. It owns supercenters, supermarkets, hypermarkets, and other stores alongside operating e-commerce websites to sell its products, including various grocery items like frozen foods, dairy, meat, and other products. The company ranks 3rd on our list of the best grocery stocks to buy.
On June 17th, Walmart Inc. (NYSE: WMT) announced its investment in DroneUp after completing drone deliveries from its stores during the company’s pilot drone delivery program. This brings in more potential for the company’s online sales and deliveries in the future since Walmart Inc. (NYSE: WMT) commented that it would be able to execute drone deliveries in 4,700 stores stocked with over 100,000 popular products, located within 10 miles of about 90% of the American populace.
For the fiscal first quarter of 2021, Walmart Inc. (NYSE: WMT) had EPS valued at $1.18, beating estimates by $0.09. Its revenue came in at $133.67 billion, representing an 8.72% growth year over year and beating estimates by $2.76 billion. The company has a gross profit margin of 25.1% and has gained 13.02% in the past year.
By the end of the first quarter of 2021, 58 hedge fund holders held stakes in Walmart Inc. (NYSE: WMT), valued at roughly $5.88 billion. This is compared to 70 hedge fund holders in the previous quarter with a total stake value of roughly $6.19 billion.
2. Target Corporation (NYSE: TGT)
Number of Hedge Fund Holders: 60
Target Corporation (NYSE: TGT) is a general merchandise retailer in the US offering various products, including grocery items such as dairy, frozen food, and dry grocery. The company sells its products online as well as through its outlets, and as of January 2021, it was operating almost 1,897 stores. It ranks 2nd on our list of the best grocery stocks to buy.
On June 8th, Target Corporation (NYSE: TGT) was upgraded to a Buy by UBS after the latter witnessed structural improvements. The price target was hiked to $265 from $210. 21 other firms have a Buy-equivalent rating or higher on the company as well. In the first quarter of 2021, the company’s EPS was valued at $0.59, beating estimates by $0.19. Its revenue came in at $19.61 billion, representing an 11.28% growth year over year and beating estimates by $576.64 million. Target Corporation (NYSE: TGT) has a gross profit margin of 30.1% and has gained 35.89% in the past 6 months and 33.81% year to date.
By the end of the first quarter of 2021, 60 hedge fund holders held stakes in Target Corporation (NYSE: TGT), valued at roughly $4.76 billion. This is compared to 78 hedge fund holders in the previous quarter with a total stake value of roughly $4.06 billion.
LRT Capital Management, an investment management firm, mentioned Target Corporation (NYSE: TGT) in their first quarter 2021 investor letter. Here’s what they said:
“Target, the Minneapolis-based retailer, continues to fire on all cylinders as the company has reported two quarters in a row of +20% revenue growth (5% traffic growth + 15% average basket size6 ), coupled with the strongest EBITDA margins in over four years. The company has successfully navigated the Covid-19 pandemic with online sales growing by 155% and 118% during Q3 2020 and Q4, respectively.
On March 2nd, the company reported another stellar quarter, with same-store sales growing by over 20%, and both earnings (+57% YoY) and revenues (+21% YoY) beating estimates. The shares are up 14.11% year-to-date. We believe the shares are a bargain 23x trailing and 20x forward earnings.”
1. Amazon.com, Inc. (NASDAQ: AMZN)
Number of Hedge Fund Holders: 243
Amazon.com, Inc. (NASDAQ: AMZN) is a retailer of consumer products operating in the US and internationally. Its products include grocery items, and it also offers delivery services through Amazon Fresh. It ranks 1st on our list of grocery stocks to buy.
On June 22nd, Amazon.com, Inc.’s (NASDAQ: AMZN) acquisition of MGM was reported by the Wall Street Journal to be reviewed by the FTC. The acquisition is worth $8.45 billion and is due to bring more content under Amazon’s wing, including the James Bond franchise. In the first quarter of 2021, the company’s EPS was valued at $15.79 versus estimates of $9.64, and its revenue came in at $108.52 billion, representing a 43.82% growth year over year. Amazon.com, Inc. (NASDAQ: AMZN) has a gross profit margin of 40.48% and has gained 9.87% in the past 6 months and 9.82% year to date as well.
By the end of the first quarter of 2021, 243 hedge fund holders held stakes in Amazon.com, Inc. (NASDAQ: AMZN), valued at roughly $50.4 billion. This is compared to 273 hedge fund holders in the previous quarter with a total stake value of roughly $51.5 billion.
You can also take a peek at Top 10 Consumer Discretionary Stocks to Buy in 2021 and 10 Best Stocks To Buy and Hold For 5 Years.
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Disclosure: None. 10 Best Grocery Stocks to Buy is originally published on Insider Monkey.
