1. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 76
Starbucks Corporation (NASDAQ:SBUX) is a globally recognized coffee brand operating through three key segments: North America, International, and Channel Development. The company offers an extensive range of coffee and tea beverages, food products, and merchandise. Moreover, Starbucks licenses its brand to third-party stores and retailers, further expanding its market presence.
The appointment of former Chipotle CEO, Brian Niccol, has sparked optimism among investors for Starbucks Corporation (NASDAQ:SBUX). He has a proven track record of turning around businesses which has ignited hopes for a revival. In addition to this, Starbucks Corporation (NASDAQ:SBUX)’s focus on expanding its store footprint, particularly in China, could drive future growth. It tops our list of the best food stocks.
Starbucks Corporation (NASDAQ:SBUX) is appealing to dividend-focused investors with a competitive yield of 2.34%. This payout is well-supported by the company’s strong financials. In the past year, Starbucks generated $3.6 billion in free cash flow, with a five-year average of $2.81 billion.
On October 16, analysts at Morgan Stanley raised their price target for Starbucks Corporation (NASDAQ: SBUX) shares from $98 to $115, maintaining an “Overweight” rating.
Here’s what ClearBridge Investments said about Starbucks Corporation (NASDAQ:SBUX) in its Q3 2024 investor letter:
“Similarly, we took advantage of a business reset at Starbucks Corporation (NASDAQ:SBUX) in the third quarter to initiate a position in the global coffee retailer. A confluence of factors, including degraded store-level operations and long consumer wait times, consumer fatigue with high prices and weakening engagement among occasional Starbucks customers has led to declining U.S. same-store sales growth. While the path ahead will likely require reinvestment back into the business, there are many merits to Starbucks’ business including its strong brand name and category leading market position. In response to recent challenges, Starbucks has appointed change-agent CEO Brian Niccol, who we know from the Strategy’s ownership of Chipotle Mexican Grill during its turnaround. Niccol has a successful track record of investing in product innovation and fixing execution issues, which we believe are the primary challenges facing Starbucks today. Starbucks represents the kind of successful playbook we have executed on historically – focusing on high-quality businesses and brands while being disciplined around the entry point into investments with attractive risk-reward opportunities.”
Overall, Starbucks Corporation (NASDAQ:SBUX) ranks first among the 10 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 timeframe. If you are looking for an AI stock that is more promising than SBUX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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