In this article, we shall discuss the 11 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.
4- The Hershey Company
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. is an American consumer-focused beverage company which specializes in the production of craft spirits, whiskey, and coffee. Investor interest around Eastside Distilling Inc. 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. is one of the best sugar stocks to buy now.
After a merely adequate 2022, Eastside Distilling Inc. 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. 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 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. 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. 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. 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. 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. 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. is an ideal pick for investors looking to shield themselves from macroeconomic turbulence in 2023.
Investors have been weary of Adecoagro S.A. 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. 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. 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. 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. 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. 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. 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. has skyrocketed in Q3 2022, with 36 funds long the stock, up from 28 in Q2 2022.
5. Archer-Daniels-Midland Company (NYSE:ADM)
Hedge Fund Holdings: 37
Based in Chicago, Illinois, Archer-Daniels-Midland Company is an American multinational food processing and commodities trading corporation. The company operates more than 270 plants and 420 crop procurement facilities globally, where cereal grains, sugar, and oilseeds are processed into food, beverage, and animal feed.
On December 13, UBS analyst Manav Gupta initiated coverage of Archer-Daniels-Midland Company with a Buy rating and a $115 price target. According to the analyst, the company is projected to deliver earnings of $7.75 per share by 2026, factoring in productivity and innovation initiatives, even in a normalized margin environment. Gupta estimates earnings bottoming at $6.07 per share, which the analyst says is substantially above current normalized earnings levels of $4.50 per share.
Here is what Diamond Hill Capital had to say about Archer-Daniels-Midland Company in their Q1 2022 investor letter:
“ADM is a leading agricultural processor that also operates a global nutrition business focused on the development of ingredients and flavors for food and beverages, supplements and more. The company’s recent operating results have benefited (unfortunately) from the war in Ukraine as grain prices and agricultural markets globally experienced strong price increases. ADM is positioned well to benefit from the volatility due to its stable North American agricultural base.”
4. The Hershey Company (NYSE:HSY)
Hedge Fund Holdings: 42
Based in Derry Township, Pennsylvania, The Hershey Company is an American multinational company and is one of the largest chocolate manufacturers in the world. The company also specializes in cookies, cakes, beverages, and other products. As of Q3 2022, The Hershey Company beat EPS estimates of $2.1 by $0.07, posting earnings of $2.17 per share. The company generated a total revenue of $2.73 billion in Q3 2022, beating consensus $2.62 billion.
On December 12, UBS analyst Cody Ross upgraded The Hershey Company to Buy from Neutral, raising the price target on the stock to $269 from $244. According to the analyst, packaged food investors should remain selective generally heading into 2023. Keeping this in mind, the analyst ascertains that The Hershey Company is well-leveraged to remain in a beat and raise cycle through to 2025. Ross attributes the rating upgrade to the company’s wrap-around price benefits in 2023 and additional capacity additions, as well as a highly favorable operating environment in confection.
3. Bunge Ltd. (NYSE:BG)
Hedge Fund Holdings: 48
Headquartered in Chesterfield, Missouri, Bunge Ltd. is an American agribusiness and food company which specializes in the processing and export of soybean, grain, sugar, and fertilizer.
On December 14, UBS analyst Manav Gupta initiated coverage of Bunge Ltd. with a Buy rating, and a $133 price target. According to Gupta, the market is heavily concerned with margin compression in 2024-2025, whilst ignoring the $13.50-plus per share in earnings Bunge is projected to deliver in 2022. Furthermore, the company is hardly getting credit for $3.3 billion in capital it plans to invest internally the next three years. The analyst is confident that will likely add another $2.50 per share to the stock’s EPS, a fact not reflected well in Bunge’s (NYSE:BG) current valuation. This provides for an excellent entry-point for investors.
In Q3 2022, Bunge Ltd. posted an EPS of $3.45, beating estimates of $2.49 by $0.96. Furthermore, the company generated a total revenue of $16.76 billion, conclusively beating consensus expectations of $16.43 billion. Moreover, Bunge Ltd. managed to maintain hedge fund sentiment around its stock in Q3, with 48 funds long the stock in Q2 and Q3 of 2022.
Here is what Old West Investment Management had to say about Bunge Limited in their Q1 2022 investor letter:
“Bunge (pronounced BUN-GEE) Ltd is one of the biggest agribusinesses and food companies in the world. There are four worldwide companies that dominate the sector, the others being Archer-Daniels-Midland Cargill, and Dreyfuss. One of our favorite ways to screen for new ideas is following insider buying. When I saw the Form 4 filed by new Bunge CEO Greg Heckman, his purchase of $9 million of BG stock intrigued me. My initial thought was the company gave him the stock as a signing bonus. I contacted BG Investor Relations and asked whether it was a signing bonus or did Heckman actually write a check for $9 million. IR assured me it was his own hard-earned money that he invested in the company he was about to run.
Heckman was a long time executive at Conagra Foods who obviously sensed opportunity at BG. One of his first moves as CEO was to move the company’s HQ from New York to St. Louis, right in the middle of America’s breadbasket. BG had been plagued for years with poor decisions by underperforming management. Heckman’s decision to move to St. Louis was indicative of a no-nonsense style and he would commence cutting expenses and selling non-core assets…” (Click here to see the full text)
2. Mondelez International Inc. (NASDAQ:MDLZ)
Hedge Fund Holdings: 52
Based in Chicago, Illinois, Mondelez International Inc. is an American multinational holding company which focuses on the production and distribution of a wide variety of confectionary, food, beverage and snacks. Investor interest around Mondelez International Inc. skyrocketed in the third quarter of 2022, with 52 hedge funds having stakes in the company. This was up from 48 funds in the preceding quarter. The company beat EPS estimates of $0.69 by $0.05 in Q3 2022, posting earnings of $0.74 per share.
On December 6, Deutsche Bank analyst Steve Powers raised the price target on Mondelez International Inc. to $75 from $72, keeping a Buy rating on the shares. The analyst contends that although the company’s data points are subpar at best, there have been a number of positive developments for the market over the past several weeks, including lower than expected inflation in November, the Federal Reserve signaling a move to a more deliberate pace of hikes, and a move away from the disastrous COVID policy in China. Powers ascertains that although the macroeconomic climate is likely to remain volatile for some time, Mondelez International Inc. is well-positioned to resist the headwinds.
Here is what Coho Partners had to say about Mondelez International Inc. in their Q3 2022 investor letter:
“Analysts’ bottom-up estimates for both 2022 and 2023 for the S&P 500 Index are beginning to decline. Coho is not immune to the earnings pressure exerted by a strong USD, although the portfolio on the whole has modestly less foreign revenue exposure relative to the S&P 500 Index. The two most impacted Coho stocks includes Mondelez (NASDAQ:MDLZ), which gets about 75% of its revenues outside the U.S.”
1. PepsiCo Inc. (NYSE:PEP)
Hedge Fund Holdings: 72
PepsiCo Inc. is an American multinational food, snack and beverage company which is based out of Harrison, New York. The company is one of the biggest beneficiaries of tailwinds in the sugar industry, as it is the primary manufacturer and distributor of high-sugar products like Pepsi, Mountain Dew, Gatorade, and 7UP.
On December 7, Argus analyst John Staszak raised the price target on PepsiCo Inc. to $206 from $195, maintaining a Buy rating on the shares. According to the analyst, the company’s fundamentals seem solid, it is well-managed, offers a valuable and profitable brand portfolio, and continues to generate solid growth amid a weakening demand for many consumer staples. Staszak adds that he expects that the company’s significant cutting of cost will highly benefit earnings, with PepsiCo Inc. projected to achieve its goal of $1 billion in annual cost savings in 2022. Hedge fund sentiment around PepsiCo Inc. increased in Q3 2022, with 72 funds long the stock, up from 65 in the preceding quarter.
Here is what ClearBridge Investments had to say about PepsiCo Inc. in their Q2 2022 investor letter:
“Also in the stable and predictable cash flow camp, though with a very different business model, global food and beverage company PepsiCo (NYSE:PEP) reported very strong organic growth in the first quarter, driven by healthy price/mix, and raised revenue guidance, while holding EPS guidance. Notably, its beverage business showed expanding margins.”
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This article is originally published at Insider Monkey.
