In this article, we shall discuss the 11 best sugar stocks to buy now. To skip our detailed analysis of global food and agribusiness trends and the sugar industry, go directly and see 5 Best Sugar Stocks to Buy Now.
According to a report by McKinsey and Company, food and agribusiness have an enormous economic and social footprint. The industry is worth more than $5 trillion and it represents nearly 11% of global consumer spending, 40% of employment, and nearly 30% of greenhouse gas emissions. If current trends persevere, caloric demand is projected to increase by nearly 70% by 2050. And although resource constraints, like unbridled water demand in 2030 and the rampant degradation of arable land, continue to hamstring the sector, demand for human consumption is likely to double by 2050. To capitalize on this opportunity, investors are pouring money into agribusiness in an effort to capture value from the intrinsic technological innovation and discontinuities in food and agriculture. Evidently, global investments in the industry have tripled since 2004, to more than $160 billion in 2020, according to the report. On average, the agribusiness sector has generated greater total returns to shareholders than other industries historically.
The production, processing, and marketing of sugar is an enormous part of the global agribusiness sector, with over 210 million tonnes of sugar produced in 2021. As of 2022, there are more than 123 sugar-producing countries in the world, with the largest players being Brazil, India, Thailand, China, and the United States. However, only 30% of the global produce is traded on the international market. As little to no major sugar producers are listed on major U.S. stock exchanges, investors must deploy a unique approach to capitalize upon the sugar market. They must seek companies which produce sugar along with other agricultural products or as part of a diversified portfolio, like Bunge Ltd. (NYSE:BG). In addition, several notable consumer staple stocks and food companies, like The Hershey Company (NYSE:HSY) and PepsiCo Inc. (NYSE:PEP), manufacture products which require an enormous quantity of processed sugar.
Global Sugar Industry: Key Market Insights
The global industrial sugar market is projected to grow at a CAGR of 2.72% from $38.58 billion in 2022 to nearly $46.7 billion in 2025. Recovering steadily from the unprecedented impact of the COVID-19 pandemic and unfavorable weather conditions across all regions, the market is undergoing prominent growth all around the world due to certain drivers such as the rampant expansion of food processing activities in developing markets such as Asia Pacific, the Middle East, and Africa. Another significant growth driver for the industry is the global increase in demand for alcoholic and non-alcoholic beverages. Furthermore, skyrocketing demand for baked goods, yogurt, and confectionary is anticipated to drive the sugar market growth in the 2022-2025 analysis period. Most of the projected growth in sugar production is expected to come from Brazil and India, the two leading producers and exporters of sugar in the world; both countries account for more than 40% of global sugar production collectively. Moreover, as overall income increases and urbanization in developing countries begins to pick up, global average per-capita consumption is also expected to increase.
Photo by Victoria Priessnitz on Unsplash
Our Methodology
For this article, we looked at Insider Monkey’s database which tracks 920 elite hedge funds and identified some of the most popular stocks which produce and process sugar, or use processed sugar as an ingredient in their product portfolio. Then, we picked 11 stocks with strong fundamentals, positive analyst ratings, or a favorable hedge fund sentiment.
The stocks have been ranked based on the number of hedge funds which hold stakes in them, from lowest to highest.
Some of the best sugar stocks right now based on fundamentals, analyst ratings and hedge fund sentiment are:
1- Eastside Distilling Inc. (NASDAQ:EAST)
2- Mondelez International Inc. (NASDAQ:MDLZ)
3- Bunge Ltd. (NYSE:BG)
4- The Hershey Company (NYSE:HSY)
5- Archer-Daniels-Midland Company (NYSE:ADM)
Read on to find out why these and other stocks in this list are the best sugar stocks.
11 Best Sugar Stocks to Buy Now
11. Eastside Distilling Inc. (NASDAQ:EAST)
Hedge Fund Holdings: 3
Based in Portland, Oregon, Eastside Distilling Inc. (NASDAQ:EAST) is an American consumer-focused beverage company which specializes in the production of craft spirits, whiskey, and coffee. Investor interest around Eastside Distilling Inc. (NASDAQ:EAST) has grown in Q3 2022, with 3 hedge funds long the stock, up from 1 fund in the preceding quarter. In Q3 2022, the company posted an EPS of -$0.18, beating estimates -$0.19 by $0.01. Like Bunge Ltd. (NYSE:BG), The Hershey Company (NYSE:HSY) and PepsiCo Inc. (NYSE:PEP), Eastside Distilling Inc. (NASDAQ:EAST) is one of the best sugar stocks to buy now.
After a merely adequate 2022, Eastside Distilling Inc. (NASDAQ:EAST) is slowly rebuilding, completely rejuvenating its canning and spirits sector under new management. Although there is a temporary decline in the spirits market, the phenomena is seldom well-understood, as the company’s current transformation and price improvements are grossly overlooked. Revenue growth is expected to be driven by Craft in 2023-24, with Eastside Distilling Inc. (NASDAQ:EAST) undergoing calculated efforts to reduce costs and improve the balance sheet. The stock’s valuation is currently close to a 52-week low as of December 14, providing an excellent entry point for a long-term investment.
10. Cosan S.A. (NYSE:CSAN)
Hedge Fund Holdings: 4
Headquartered in São Paulo, Cosan S.A. (NYSE:CSAN) is a Brazilian conglomerate company which specializes in the production of bioethanol, sugar, and energy. Cosan (NYSE:CSAN) operates more than 12 sugar mills, 3 sugar refineries, and one export terminal at the Port of Santos.
Despite a turbulent macroeconomic climate, the company generated a strong EBITDA beat in the third quarter of 2022, seeing solid returns from all segments. Management has been injecting greater investment into growth projects, which have been claiming a greater chunk of capital allocation by the quarter. And although the sugar segment is being impacted by detrimental weather conditions and unfavorable tax policies, the underlying healthy demand is set to provide substantial tailwinds. Furthermore, Q3 2022 returns for Cosan S.A. (NYSE:CSAN) were solid; the company beat EPS estimates of $0.07 by $0.04, posting earnings of $0.11 per share. Hedge fund sentiment around Cosan S.A. (NYSE:CSAN) was at a one-year high in Q3 2022, with 4 hedge funds long the stock. This was up from 3 funds in the preceding quarter.
9. Tootsie Roll Industries Inc. (NYSE:TR)
Hedge Fund Holdings: 10
Headquartered in Chicago, Illinois, Tootsie Roll Industries Inc. (NYSE:TR) is an American multinational confectionary company which specializes in the production and distribution of its namesake Tootsie Rolls and Tootsie Pops.
Tootsie Roll Industries Inc. (NYSE:TR) is currently in the midst of a massive recovery in terms of revenue and profitability in 2022. Despite volatility in the stock market, company shares are up by 25.24% year-to-date, as of December 14. Furthermore, Tootsie Roll Industries Inc. (NYSE:TR) is riding the coat-tails of a massive, Halloween-induced surge in demand, and is currently hiking prices to counter macroeconomic pressures. The company is expected to perform well in the long-term, and its share price has embodied that sentiment, making Tootsie Roll Industries Inc. (NYSE:TR) the ideal pick for a defensive investor.
8. Adecoagro S.A. (NYSE:AGRO)
Hedge Fund Holdings: 11
Based in Luxembourg, Adecoagro S.A. (NYSE:AGRO) is a multinational agricultural company, involved in a range of businesses ranging from cattle and dairy operations, to sugar, ethanol, and energy production. Like Bunge Ltd. (NYSE:BG), The Hershey Company (NYSE:HSY) and PepsiCo Inc. (NYSE:PEP), Adecoagro S.A. (NYSE:AGRO) is an ideal pick for investors looking to shield themselves from macroeconomic turbulence in 2023.
Investors have been weary of Adecoagro S.A. (NYSE:AGRO) since a massive plummet in the company’s share price in 2020. However, the stock price depreciation was most probably a precautionary safeguard to prepare for bad performance, owing to bad weather and the coronavirus pandemic. However, the company has recently hedged against pricing turbulence with an exceptionally diverse business strategy. The management structure also complements the diversified business model of the company and facilitates the firm in optimizing resource allocation, decrease costs, and procure a solid reputation.
7. Whole Earth Brands Inc. (NASDAQ:FREE)
Hedge Fund Holdings: 24
Based in Chicago, Illinois, Whole Earth Brands Inc. (NASDAQ:FREE) is an American food company which serves as a global platform of branded products and ingredients. The company’s portfolio spans sweeteners, jams, and chocolates. Investor interest around Whole Earth Brands Inc. (NASDAQ:FREE) increased substantially in Q3 2022, with 24 hedge funds holding stakes in the stock, up from 16 in Q2 2022. On December 12, the company reaffirmed its 2022 guideline, projected to deliver a revenue of $545 million in 2022, against consensus $535.57 million.
On November 29, Cowen analyst Brian Holland lowered the price target on Whole Earth Brands Inc. (NASDAQ:FREE) to $11 from $14, maintaining an Outperform rating on the shares. According to the analyst, improved branded CPG segment sales trends are apparent and there is a clear path to free cash flow inflection in Q4 2022. If this scenario continues to play out into 2023, Holland ascertains that the current valuation is highly discounted. In Q3 2022, Whole Earth Brands Inc. (NASDAQ:FREE) generated a total revenue of $133.5 million, beating consensus by $2.85 million.
Here is what Laughing Water Capital had to say about Whole Earth Brands Inc. (NASDAQ:FREE) in their Q2 2022 investor letter:
“Whole Earth, our alternative sweeteners business, currently trades around 6-7x my estimate of normalized FCF, versus packaged food peers at more than 20x. To be fair, the company has somewhat painted themselves into a corner as they have been pitching themselves as an M&A growth story, but after ~doubling revenue over the last 2 years, at present the balance sheet is full, and they do not have the equity cost of capital needed to continue to pursue M&A with equity.
Thus, the revenue growth story is on hold (although their category should grow faster than other packaged foods), which combined with some inflationary pressures has led to shares being punished. From my perspective, a stalled growth story is not great, but it is better than a continued growth story that is based on value destroying dilutive equity transactions: management deserves some credit for being disciplined. Further, debt paydown is a totally reasonable strategy to build equity value. The company is presently rebuilding the balance sheet, which at some point will likely be fire power for future M&A.
Putting the balance sheet aside, perhaps the most notable recent development is Martin Franklin bought ~14% of the equity during the quarter. No one is infallible, but at the very least it is curious to note that the last time Martin Franklin and FREE’s Chairman Irwin Simon worked together it was at Jarden Corporation, where Franklin compounded capital at 30% a year for 15 years before selling the business.
Again, there is no guarantee here that history will rhyme, but a low starting valuation is a prerequisite for that sort of compounding, so we are starting from a good place. How cheap does a stock have to be to partner with people that have an incredible history of buying and building businesses? Should we wait for 4x or 5x normalized FCF? Or should we plow ahead at 6-7x and just acknowledge that the road forward will have plenty of speed bumps?”
6. Brown-Forman Corp. (NYSE:BFB)
Hedge Fund Holdings: 36
Headquartered in Louisville, Kentucky, Brown-Forman Corp. (NYSE:BFB) is an American company which specializes in the production and sale of spirits and wine. One of the largest alcoholic beverage producers in the world, the company uses large quantities of processed sugar to manufacture a diverse portfolio, ranging from scotch whisky to tequila.
The company is a regular dividend payer, with an annual yield of 1.20% and a quarterly dividend amount of $0.21 per share. Furthermore, although Brown-Forman Corp. (NYSE:BFB) is currently battling major headwinds due to forex-driven margin pressures, the company seems well-leveraged to navigate through the pitfalls. Operating cash flows have alleviated net debt and enabled a special dividend. Furthermore, Brown-Forman Corp. (NYSE:BFB) has introduced a new line of premium products which is expected to rake in greater revenue in 2023. The company has been undergoing multiple expansion projects, which has led the stock to demonstrate a strong six-year history of delivering solid returns to shareholders. Investor interest around Brown-Forman Corp. (NYSE:BFB) has skyrocketed in Q3 2022, with 36 funds long the stock, up from 28 in Q2 2022.
Click to continue reading and see 5 Best Sugar Stocks to Buy Now.
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Disclosure: none. 11 Best Sugar Stocks to Buy Now is originally published on Insider Monkey.
