We recently published a list of 10 Best Food Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where DoorDash, Inc. (NASDAQ:DASH) stands against other 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.

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).

DoorDash, Inc. (NASDAQ:DASH)

Number of Hedge Fund Holders: 73

DoorDash, Inc. (NASDAQ:DASH) is a technology company that connects customers with local businesses. The platform allows users to order food, groceries, and other items from a variety of merchants. DoorDash, Inc. (NASDAQ:DASH) also offers delivery and pickup services as well as subscription-based memberships for added benefits.

The stock recently reached a 52-week high at $154.18. This milestone reflects an 84% increase over the past year. Investors are clearly confident in DoorDash, Inc.’s (NASDAQ:DASH) business model and growth strategy, propelling the stock despite competition in the gig economy and food delivery sector. DoorDash, Inc. (NASDAQ:DASH) also expanded its grocery delivery partnership with Wegmans, further solidifying its presence in this rapidly growing segment.

In the future, the company aims to broaden its offerings beyond food delivery to include items like alcohol, beauty products, and sports goods, significantly expanding its total addressable market. Despite being in the early stages of this expansion, DoorDash, Inc. (NASDAQ:DASH) has already achieved a 22.3% year-over-year revenue growth, highlighting strong demand for its services.

In Q3, the company’s user growth was strong, with double-digit increases and an all-time high achieved during the quarter. Order frequency also reached record levels, driven by improvements in selection, quality, and affordability.

Here’s what TimesSquare Capital Management said about DoorDash, Inc. (NASDAQ:DASH) in its Q2 2024 investor letter:

“Our preferences in the Consumer-oriented sectors lean toward value-oriented or specialty retailers, franchise models, or premium brands. New to the strategy was the online food delivery platform and logistics provider DoorDash, Inc. (NASDAQ:DASH) Since its IPO in 2021, the company’s scale has grown to entrench it with customers and consumers, though we have been cautious about its high valuation. Recently, the company reported lower-than-expected guidance for future margins and that caused its shares to sell off. In our view, DoorDash was appropriately investing for future growth and absorbing recent increased wage costs. Believing this short-term price dislocation made for an attractive entry price, we began buying, and DoorDash was up 2% through the end of the quarter.”

Overall, DASH ranks 2nd on our list of best food stocks to buy according to hedge funds. While we acknowledge the potential of food companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DASH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article is originally published at Insider Monkey.