We recently published a list of the 12 Best Pizza Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Lifeway Foods, Inc. (NASDAQ:LWAY) stands against other best pizza stocks to buy according to hedge funds.
Overview of the Pizza and Frozen Pizza Market
Pizza is one of the most popular foods in North America. According to the Global Pizza Analysis Report 2024 released by Research and Markets, the global pizza market size was valued at around $148.6 billion in 2023. It is expected to reach $222.5 billion by 2032, growing at a compound annual growth rate (CAGR) of 4.59% between 2023 and 2032. The primary reasons behind this growth are the shifting consumer dietary patterns influenced by rapid westernization, the increasing popularity of online pizza ordering platforms, and the introduction and popularization of healthier product variants, such as gluten-free, vegan, and low-calorie pizza options.
Pizza Today surveyed 748 pizza business owners from across the US to develop the Pizza Industry Trends Report 2024. The report showed that online ordering was becoming the most popular norm in the industry, with 24.91% of respondents investing to upgrade their online ordering technology. In addition, pizzeria owners are directing around 78% of their advertising budgets to social media apps to boost growth and prominence. Around 65% of business owners surveyed showed signs of optimism regarding their annual sales, expecting growth in the next 12 months.
Frozen pizzas are also a significant force in the industry due to their ease of availability, affordability, and convenience. According to Grand View Research, the US frozen pizza market was valued at $6.62 billion in 2022 and is anticipated to grow at a CAGR of 6.9% between 2023 and 2030. Consumers are increasingly shifting to this variety due to hectic lifestyles and other factors such as increased disposable income and a rise in the standard of living.
In addition, frozen pizzas are becoming popular because they offer the same varieties as fresh pizza options, such as cheese pizza, meat pizza, veggie pizza, and more. Gluten-free frozen pizzas are also increasing in popularity due to the growing health consciousness among consumers and the increasing prevalence of gluten allergies, celiac disease, gluten intolerance, and other health reasons. The gluten-free segment is expected to grow with the fastest CAGR among all pizza categories, increasing by 9.2% between 2023 and 2030.
Trends in the Pizza Market
Chicken dominated the toppings segment in the pizza market, with the highest share of more than 30% in 2022, according to statistics by Grand View Research. Companies offering chicken produce and toppings are benefitting from this trend. The popularity of chicken topping has also been supported by the increasing preference for healthier eating and the growth of fast-casual restaurants. However, the fastest growing segment remains to be bacon. The bacon segment is expected to grow at a CAGR of 9.5% between 2023 and 2030.
The regular/restaurant-style pizza segment dominated the market with the highest share, 55%, as of 2022. Furthermore, supermarkets and hypermarkets are the most prominent distribution channels for the pizza market. They had the highest share, more than 30%, in 2022. The primary reason behind this trend is the increasing convenience and variety offered by these channels.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 30 pizza stocks. We also considered cheese and flour stocks. We then selected the top 12 stocks most popular among elite hedge funds. We sourced hedge fund data from Insider Monkey’s database. The stocks are sorted in ascending order of the number of hedge fund holders that have stakes in them as of fiscal Q3 2024.
Why do we care about what hedge funds do? 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).
Lifeway Foods, Inc. (NASDAQ:LWAY)
Hedge Fund Holders: 18
Lifeway Foods, Inc. (NASDAQ:LWAY) produces and markets probiotic-based products in the US and internationally. Its primary product is a drinkable kefir, a cultural dairy product. The company’s product categories include various European-style soft cheeses, such as farmer and white cheese. The company markets its products under the Fresh Made, Lifeway, and Glen Oaks Farms brand names.
Its net sales reached $46.1 million in fiscal Q3 2024, an increase of 12.7% of $5.2 million compared to fiscal Q3 2023. This growth was primarily volume-driven by its branded drinkable kefir. Fiscal Q3 2024 marked the company’s 20th consecutive quarter of quarterly net sales growth, reflecting five consecutive years of quarterly growth.
Lifeway Foods, Inc., (NASDAQ:LWAY) plans to continue this growth momentum. It is focusing its capital spending on three core areas: cost reductions, growth, and facility improvements. The company has the capacity and operations to support continued rapid sales growth.
With an increasing trend of customers seeking value and high-quality nutritious products at affordable prices, Lifeway Foods, Inc.’s (NASDAQ:LWAY) products are becoming more popular. It is strategically investing in its Lifeway Farmer Cheese, which is protein-rich and full of probiotics and bioavailable nutrients. Consumer demand for the company’s soft cheese products is expected to remain high due to these qualities. In fiscal Q1 2025, the company’s Farmer Cheese will, for the first time, gain mass market placement in an estimated 1,400 stores at a large national retail part.
Rewey Asset Management stated the following regarding Lifeway Foods, Inc. (NASDAQ:LWAY) in its Q3 2024 investor letter:
“Lifeway Foods, Inc. (NASDAQ:LWAY) was our top percentage gainer in the quarter, up an astounding 103%! We often write about how the power of investing in neglect is equally important to investing in low valuations, and LWAY demonstrated this point in 3Q24. We purchased LWAY in 2Q24 as shares sold off despite a strong quarter that demonstrated continued revenue growth and margin expansion, despite a slight ‘miss’ to street EPS estimates. In our view, there was nothing bad about 2Q24, other than inaccurate sell side models. On August 13th, LWAY blew away these low expectations with a strong FY3Q report, where revenues grew over 25%, surpassing $50 million in a quarter for the first time. Shares further surged on Sept 23rd, when Danone, the global dairy company that owns 23.36% of the company, made an unsolicited bid for the company at $25 per share. While we think a deal may eventually get done, we think this first offer of $25 is too low.”
Overall, LWAY ranks 10th on our list of the best pizza stocks to buy according to hedge funds. While we acknowledge the potential of pizza stocks, 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 LWAY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.