13 Best Grocery Stocks To Buy Now

Published on January 23, 2024 at 8:42 am by Sheryar Siddiq in Hedge Funds, News

In this article, we discuss the 13 best grocery stocks to buy now. To skip our analysis of the grocery and food industry, go directly to the 5 Best Grocery Stocks to Buy Now.

Grocery stocks are not impervious to recessions; however, they have demonstrated considerable resilience. This is because consumers typically continue to frequent grocery stores even in the face of challenging economic conditions. Based on a survey conducted by PwC, grocery industry experts expect the market share of online grocery shopping to increase to between 35% and 50% in Germany, France, the UK, Turkey, and the Netherlands by 2050. Retailers that wish to keep or grow their current market share by becoming leading omni-channel players need to launch eGrocery offerings early to gain the necessary expertise. The research and survey responses underscore that online grocery retailing will progressively penetrate the traditional market in the coming decade. Although brick-and-mortar stores will retain a substantial market share, their revenue, and profitability will face erosion as consumers increasingly embrace the convenience of new digital services. While the complete transformation to an omni-channel model and the precise trajectory ahead remains uncertain, the early success of grocery retailers in the online space is indicating the direction forward.

As we progress into 2024, it’s worth noting that specific grocery items have exhibited resilience amid economic challenges and seem poised for the coming quarters. The focus on expanding plant-based alternatives, particularly in the realm of meat substitutes, has benefited companies with a significant presence in consumers’ shopping preferences. The period before this had been marked by inflation, leading to elevated input costs for manufacturers and affecting consumers’ purchasing power, subsequently impacting companies’ sales volumes. However, there are indications that the inflationary trend is now displaying signs of moderation.

That said, the uncertainty remains about whether consumers will increase spending in 2024 or adopt a more frugal approach. Walmart Inc. (NYSE:WMT) CEO Doug McMillon suggested to CNBC that high credit card balances and shrinking bank accounts might lead to reduced consumer spending, impacting grocery retailers. However, a potential bright spot in this uncertainty is the growing popularity of private label items. According to FMI The Food Industry Association, 96% of grocery shoppers currently purchase private label products occasionally. While 37% do so to save money, the quality and taste of store brands are also significant factors attracting consumers.

With that said, let’s explore some of the best grocery stocks globally, including notable entities such as The Kroger Co. (NYSE:KR), Walmart Inc. (NYSE:WMT), and General Mills, Inc. (NYSE:GIS), among others mentioned below.

A busy produce section in a grocery store, with heaps of fresh fruits and vegetables.

Our Methodology

In creating our selection of the best grocery stocks to buy, we initially identified the largest grocery companies globally, ranking them based on market capitalization. Subsequently, we assessed the number of hedge funds that had invested in their shares as of September 2023 using data from Insider Monkey’s database, encompassing 910 hedge funds. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.

13. Unilever PLC (NYSE:UL)

Number of Hedge Fund Holders: 21

Founded on September 2, 1929, Unilever PLC (NYSE:UL) is a British multinational fast-moving consumer goods company resulting from the merger of British soap maker Lever Brothers and Dutch margarine producer Margarine Unie. The company’s headquarters are located in London.

By the end of this year’s third quarter, 21 out of the 910 hedge funds part of Insider Monkey’s database had bought and owned Unilever PLC (NYSE:UL)’s shares. Ken Fisher’s Fisher Asset Management is the firm’s biggest hedge fund shareholder in our database due to its $488 million investment.

Much like The Kroger Co. (NYSE:KR), Walmart Inc. (NYSE:WMT), and General Mills, Inc. (NYSE:GIS), Unilever PLC (NYSE:UL) ranks as one of the best grocery stocks to buy.

12. BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ)

Number of Hedge Fund Holders: 27

BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ), commonly known as BJ’s, is an American membership-only warehouse club chain headquartered in Marlborough, Massachusetts. The company operates in the eastern United States, as well as in Ohio, Michigan, Indiana, and Tennessee.

In a strategic move, Nextuple, a pioneer in transforming retail and grocery fulfillment, announced on December 14 that BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) has invested in a new Enterprise Inventory Service. This initiative involves leveraging the Nextuple OMS Studio to replace BJ’s legacy OMS inventory system. With annual revenue exceeding $19 billion and a presence in more than 230 clubs, BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) selected Nextuple to facilitate a transition away from SaaS solutions and to modernize its inventory operations.

After sifting through 910 hedge funds for their Q3 2023 investments, Insider Monkey discovered that 27 had owned a stake in BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ). Ken Griffin’s Citadel Investment Group is the firm’s largest investor in our database, since it owns a stake worth $115.8 million.

11. Casey’s General Stores, Inc. (NASDAQ:CASY)

Number of Hedge Fund Holders: 27

Casey’s General Stores, Inc. (NASDAQ:CASY) is a chain of convenience stores located in the Midwestern and Southern United States, boasting over 2,500 locations across 17 different states. The company holds the position of the third-largest convenience store chain and the fifth-largest pizza chain in the U.S.

Over the past 10 years, Casey’s General Stores, Inc. (NASDAQ:CASY) has delivered a return of 330.5% to its shareholders, surpassing the S&P 500’s return of 159.7%. This impressive outperformance is attributed to robust growth in both revenue and EBITDA, with compound annual growth rates (CAGR) of 9.6% and 15.9%, respectively, over the last decade. Looking over a 20-year span since 2003, the company has demonstrated even more significant compounding, with revenue and EBITDA compounding at 23.0% and 19.7%, illustrating its consistent long-term growth in both sales and earnings.

At the end of Q3 2023, 27 hedge funds tracked by Insider Monkey owned stakes in Casey’s General Stores, Inc. (NASDAQ:CASY), up from 21 in the previous quarter. The collective value of these stakes is over $280.37 million. AQR Capital Management was one of the company’s leading stakeholders in Q3.

ClearBridge Mid Cap Strategy made the following comment about Casey’s General Stores, Inc. (NASDAQ:CASY) in its third 2023 investor letter:

“The Strategy’s consumer staples holdings also fared well. One of our top performers was Casey’s General Stores, Inc. (NASDAQ:CASY), which operates convenience stores and gas stations. The company continues to drive greater growth and improve internal performance through the expansion of its private label offerings, while a cooling labor market has helped alleviate wage pressures on margins. By deliberately focusing its geographic footprint on smaller communities, the company has high market share in the regions it serves as well as pricing power, which we believe will continue to be long-term earnings drivers.”

10. Dollar Tree, Inc. (NASDAQ:DLTR)

Number of Hedge Fund Holders: 38

Dollar Tree, Inc. (NASDAQ:DLTR) is a retail chain in the United States offering a variety of products at multiple price points. The company is based in Chesapeake, Virginia, and boasts a network of 15,115 stores spread across the 48 contiguous U.S. states and Canada. Leveraging a widespread logistics network comprising 24 distribution centers, Dollar Tree, Inc. (NASDAQ:DLTR) primarily caters to price-conscious customers. The company’s revenue for the third quarter of 2023 was $7.31 billion, missing the Wall Street analyst estimate of $7.42 billion. Moreover, Dollar Tree, Inc. (NASDAQ:DLTR) reported an adjusted EPS of $0.97 for the quarter, missing the analyst estimate of $1.01. On the other hand, the company’s same-store net sales increased by 3.9%, driven by a 4.7% increase in traffic and partially offset by a 0.8% decline in average tickets.

According to Insider Monkey’s third quarter database, 38 hedge funds were bullish on Dollar Tree, Inc. (NASDAQ:DLTR), compared to 37 funds in the earlier quarter. Paul Hilal’s Mantle Ridge LP is the biggest position holder in the company, with 11.36 million shares worth $1.2 billion.

9. General Mills, Inc. (NYSE:GIS)

Number of Hedge Fund Holders: 39

General Mills, Inc. (NYSE:GIS) is a well-known American multinational company recognized for its production and marketing of branded processed consumer foods, widely distributed through retail channels. The company’s roots can be traced back to its founding near Saint Anthony Falls in Minneapolis, along the Mississippi River, where it initially gained prominence as a significant flour milling operation.

In the second quarter of fiscal year 2024, General Mills, Inc. (NYSE:GIS)’s pet segment, inclusive of Blue Buffalo, experienced a 4% decline in net sales, amounting to $569 million. This decrease was attributed to lower pound volume, partially mitigated by favorable net price realization and mix. Dry pet food encountered a mid-single-digit decrease in net sales, wet pet food experienced a double-digit decline, and pet treats saw a double-digit increase compared to the previous year. Despite the sales challenges, the segment’s operating profit reached $102 million, marking an 18% increase. This growth was primarily fueled by favorable net price realization and mix, along with cost savings. However, it was partially offset by lower volume, increased other supply chain costs, and elevated expenses.

As of the end of Q3 2023, 39 hedge fund investors had allocated their investments to General Mills, Inc. (NYSE:GIS), according to the Insider Monkey database. The largest shareholder of General Mills, Inc. (NYSE:GIS) was Millennium Management, with a holding of approximately 1.6 million shares valued at about $102.8 million.

8. The Kraft Heinz Company (NASDAQ:KHC)

Number of Hedge Fund Holders: 40

The Kraft Heinz Company (NASDAQ:KHC), commonly referred to as Kraft Heinz, is an American multinational food corporation resulting from the merger of Kraft Foods and H.J. Heinz Company. Operating with dual headquarters in Chicago and Pittsburgh, the company engages in the production and distribution of an extensive array of products, spanning cheese, prepared meals, meats, dairy products, condiments, coffee, and more. Earlier in November, The Kraft Heinz Company (NASDAQ:KHC) adjusted its full-year 2023 outlook for adjusted EPS, which was anticipated to fall within the range of $2.91 to $2.99, an increase from the prior range of $2.83 to $2.91.

In the third quarter of the current year, 40 out of the 910 hedge funds analyzed by Insider Monkey retained a stake in the company. The leading hedge fund investor in The Kraft Heinz Company (NASDAQ:KHC) is Berkshire Hathaway, overseen by Warren Buffett, holding a substantial investment valued at $10.9 billion.

The Kraft Heinz Company (NASDAQ:KHC) joins the ranks of The Kroger Co. (NYSE:KR), Walmart Inc. (NYSE:WMT), and General Mills, Inc. (NYSE:GIS) as one of the best grocery stocks to buy.

7. The Kroger Co. (NYSE:KR)

Number of Hedge Fund Holders: 41

The Kroger Co. (NYSE:KR), widely recognized as Kroger, is an American retail corporation that oversees an extensive network of supermarkets and multi-department stores across 35 states in the United States. Operating in over 2,700 supermarkets and multi-department stores, The Kroger Co. (NYSE:KR) holds a prominent position in the global food retail industry.

Recently, Kroger Co (NYSE:KR) revealed its third-quarter results. The adjusted earnings per share (EPS) for the period were $0.95, surpassing expectations by $0.03. The reported revenue stood at $33.96 billion, exceeding estimates by $60 million.

As of the end of the third quarter of 2023, 41 hedge funds tracked by Insider Monkey had investments in The Kroger Co. (NYSE:KR), marking a slight decline from 43 in the previous quarter. The collective value of these stakes is over $3.13 billion.

Oakmark Funds funds mentioned The Kroger Co. (NYSE:KR) in its Q3 2023 investor letter. Here is what the firm has to say:

“The Kroger Co. (NYSE:KR) is the second-largest grocery retailer in America behind only Walmart. Although the grocery industry is highly competitive, Kroger’s scale advantages allow it to offer a more compelling value proposition than smaller peers and earn higher returns on capital. In recent years, the market has assigned Kroger a lower multiple due to concerns that e-commerce would disrupt traditional brick-and-mortar grocery. However, we believe the company’s performance through the pandemic highlighted that its store footprint, distribution infrastructure, technology investments and strong brand all position the company well for a world with higher online grocery adoption. The stock trades for just 10x our estimate of next year’s EPS, which we believe is attractive given Kroger’s competitive positioning and earnings growth outlook. The pending merger with Albertsons has the potential to drive accelerated earnings growth and further scale advantages. If the merger is not approved, the company will have the capacity to return approximately 25% of its market cap to shareholders.”

6. Mondelez International, Inc. (NASDAQ:MDLZ)

Number of Hedge Fund Holders: 51

Mondelez International, Inc. (NASDAQ:MDLZ), commonly known as Mondelēz International, is a multinational corporation headquartered in Chicago, specializing in confectionery, food, beverages, and snacks. With an annual revenue of approximately $26 billion, Mondelez operates in around 160 countries. The company currently offers a quarterly dividend of $0.425 per share and has maintained a consistent track record of dividend growth over the past nine years. As of January 15, the stock boasts a dividend yield of 2.23%.

As of the end of Q3 2023, 51 hedge funds in Insider Monkey’s database held stakes in Mondelez International, Inc. (NASDAQ:MDLZ), a slight decrease from 55 in the previous quarter. The combined value of these stakes exceeds $1.33 billion. Holocene Advisors emerged as the leading stakeholder for the company in Q3 among these hedge funds.

In addition to The Kroger Co. (NYSE:KR), Walmart Inc. (NYSE:WMT), and General Mills, Inc. (NYSE:GIS), Mondelez International, Inc. (NASDAQ:MDLZ) comes in as one of the best grocery stocks.

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