In this article, we will discuss the 10 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.
Now that we’ve covered the broader food sector, key trends, and why it remains attractive for investors, let’s discuss the best food stocks to buy in 2024.
Photo by Lee Myungseong on Unsplash
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).
10 Best Food Stocks To Buy According to Hedge Funds
10. Domino’s Pizza, Inc. (NYSE:DPZ)
Number of Hedge Fund Holders: 32
Domino’s Pizza, Inc. (NYSE:DPZ), founded in 1960, is a global leader in pizza delivery and carryout. In its latest earnings report, the company posted solid third-quarter results, with revenue increasing by 5.1% to $52.8 billion compared to Q3 2023, driven by higher order volumes. The company also expanded its reach by opening 72 net new stores.
Domino’s Pizza, Inc. (NYSE:DPZ) saw a 5% increase in income from operations, reflecting the effectiveness of its “Hungry for MORE” strategy, especially the “Renowned Value” focus. The CEO noted that this pillar will remain a key priority for the company.
Moreover, the company has strong cash reserves, generating $446.9 million in operating cash flow during the first three quarters of 2024. This marked a 5.9% increase from the same period in 2023. This growth was mainly driven by higher net income and increased advertising revenue. DPZ is one of the best food stocks to buy according to hedge funds.
Domino’s Pizza, Inc. (NYSE:DPZ) is also a solid dividend payer, having raised its payouts for 12 years in a row. In addition, the company’s 5-year average dividend growth rate comes in at nearly 18%. It currently offers a quarterly dividend of $1.51 per share and has a dividend yield of 1.37%, as of November 20.
9. US Foods Holding Corp. (NYSE:USFD)
Number of Hedge Fund Holders: 50
US Foods Holding Corp. (NYSE:USFD) is a leading food service distributor in the United States. Headquartered in Rosemont, Illinois, the company supplies a wide range of fresh, frozen, and dry food products to a diverse customer base, including restaurants, hospitals, hotels, and schools.
US Foods Holding Corp. (NYSE:USFD) is currently witnessing strong financial and operational growth. The company’s strategic acquisition of IWC Food Service, a distributor in Nashville, has expanded its market reach. During Q3 2024, the company achieved volume growth and gained market share with key customer groups, including independent restaurants, hospitality, and healthcare. Overall, volume increased by 3.8%, with independent restaurant cases rising by 4.1%. This marked the 14th consecutive quarter of market share gains for the company.
Regarding capital deployment, US Foods Holding Corp. (NYSE:USFD) was proactive in its share repurchase program, spending $580 million this quarter. Since launching the buyback program in late 2022, it has repurchased over $1.1 billion of its shares at an average price of $50.68. The company plans to continue share buybacks as it believes its stock is undervalued and remains committed to effective capital management.
The stock price reached a record high of $62.96 in October 2024, reflecting strong investor confidence during a significant turnaround and growth phase in a challenging market. Over the past year, the company’s share price has risen by over 55%, driven by its positive growth outlook.
8. Mondelez International, Inc. (NASDAQ:MDLZ)
Number of Hedge Fund Holders: 51
Mondelez International, Inc. (NASDAQ:MDLZ) is a giant in the global snacking industry and is currently operating in over 150 countries. The company leads the future of snacking with iconic brands like Oreo, Ritz, LU, Cadbury Dairy Milk, and Toblerone.
With its market leadership position in numerous snack categories across key markets, Mondelez International, Inc. (NASDAQ:MDLZ) has a globally diversified revenue stream. This makes the company less vulnerable to market fluctuations. As seen in its recent earnings release, the company has achieved organic revenue growth across all regions despite varying consumer trends among them.
Mondelez International, Inc. (NASDAQ:MDLZ) saw solid revenue growth with a positive volume mix in Q3 2024. In developed markets, sales grew in the mid-single digits, thanks to strong growth in North American biscuits and a recovery in Europe after raising prices. Emerging markets also grew in the mid-single digits, even with ongoing boycotts of Western brands in some areas. This strong profit growth allowed the company to continue its track record of generating strong free cash flow, reaching $2.5 billion so far this year.
Moreover, Mondelez International, Inc. (NASDAQ:MDLZ) also recently increased its quarterly dividend by 11%. This marked its 11th consecutive year of dividend growth, which makes MDLZ one of the best food stocks on our list. The company distributed $2.2 billion to shareholders in the form of cash dividends in Q2, amounting to $0.47 per share for the quarter.
7. International Flavors & Fragrances Inc. (NYSE:IFF)
Number of Hedge Fund Holders: 52
International Flavors & Fragrances (NYSE:IFF) is a New York-based company that has established itself as a global leader in delivering innovative solutions for the food, health, beauty, and pharma industries. The company operates through four primary segments namely Nourish, Health & Biosciences, Scent, and Pharma Solutions.
International Flavors & Fragrances (NYSE:IFF) had a strong third quarter, with revenue surpassing $2.9 billion, reflecting a 9% increase on a comparable currency-neutral basis. The company experienced broad-based growth across its business units with significant volume improvements across all areas.
The company’s continued focus on productivity initiatives has also led to a 16% increase in operating EBITDA for the quarter. Moreover, leveraging the margin strength from the previous two quarters, International Flavors & Fragrances (NYSE:IFF) achieved another successful quarter of margin expansion. The EBITDA margin reached 19.4%, reflecting an improvement of 180 basis points compared to Q3 of 2023.
Due to its strong volume growth, the company has also raised its full-year 2024 guidance. It now expects sales to be between $11.1 billion and $11.3 billion, up from the previous range of $10.8 billion to $11.1 billion. Meanwhile, operating EBITDA is projected to be between $2.1 billion and $2.17 billion, an increase from the prior range of $1.9 billion to $2.1 billion. The company is also a strong dividend payer, becoming one of the best food stocks on our list.
6. PepsiCo, Inc. (NYSE:PEP)
Number of Hedge Fund Holders: 58
PepsiCo, Inc. (NYSE:PEP) is a global food and beverage giant, offering a diverse range of products under iconic brands like Lay’s, Doritos, Pepsi-Cola, Mountain Dew, and Quaker. The company operates in various segments, including North America, Europe, Africa, the Middle East, South Asia, and others. It is one of the best food stocks on our list.
PepsiCo, Inc. (NYSE:PEP)’s product portfolio spans a wide range of categories. Its core segments, Frito-Lay and PepsiCo Beverages dominate the snack and beverage markets, respectively. The company has also reached a definitive agreement to acquire Garza Food Ventures LLC, known as Siete Foods. Analysts believe this acquisition will improve the company’s portfolio by adding a genuine Mexican-American brand and expanding its range of healthier food options. This diversification strategy allows PepsiCo, Inc. (NYSE:PEP) to mitigate risks and maintain consistent growth, even when one segment faces challenges.
PepsiCo, Inc. (NYSE:PEP) is also recognized as a Dividend King, having consistently paid and raised its dividends for over 50 years. Over the past decade, the company’s dividend has more than doubled, significantly outpacing its peers. Recently, the company announced a 7% increase in its quarterly dividend to $1.36 per share, which equates to an annual dividend of $5.42. With a yield of 3.08%, this commitment to returning value to shareholders makes it an attractive investment option.
5. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 60
McDonald’s Corporation (NYSE:MCD) is a global fast-food chain. With a focus on convenience and consistency, it has become a staple in many cultures, serving millions of customers daily. MCD is one of the best food stocks, delivering an over 4% return in the past year.
Despite its popularity, the company remains focused on expanding its operations through strategic initiatives. McDonald’s Corporation (NYSE:MCD) aims to grow its global presence by adding new locations, targeting an annual net unit growth of 4-5% through 2027. This strategy is expected to increase the number of McDonald’s stores to 50,000 worldwide, addressing rising customer demand in both established and emerging markets. Moreover, the company is focusing on menu innovation, especially through the expansion of popular items in the chicken segment and plant-based options.
In addition to its growth focus, McDonald’s Corporation (NYSE:MCD) has shown strong financial resilience even in challenging conditions. According to its latest earnings report, revenue grew by 3% year-over-year. The company also declared a 6% increase in dividends to $1.77 per share. These results were achieved despite facing inflationary pressures during the quarter.
4. Chipotle Mexican Grill, Inc. (NYSE:CMG)
Number of Hedge Fund Holders: 69
Chipotle Mexican Grill, Inc. (NYSE:CMG) is a popular fast-casual restaurant chain known for its customizable burritos, bowls, quesadillas, tacos, and salads. The chain offers convenient dining options, including in-store dining, takeout, and delivery services across different locations in various countries. CMG ranks fourth on our list of the best food stocks.
The company’s focus on high-quality, affordable Mexican food, coupled with its efficient operations, has driven sales growth by 13% during Q3 2024 to reach $2.8 billion. Chipotle Mexican Grill, Inc.’s (NYSE:CMG) marketing initiatives including the relaunch of its smoked brisket and improvement in its Net Promoter Score have led to higher foot traffic and growing order amount. This has driven positive analyst sentiments towards the stock.
Going forward, Chipotle Mexican Grill, Inc. (NYSE:CMG)’s aggressive expansion plans, including the addition of 280 to 315 new restaurants this year and the expansion of its digital offerings at these locations, are expected to fuel future growth. Besides this, the company anticipates mid-to-high single-digit comparable sales growth for the full year of 2024.
Here’s what Pershing Square Holdings said about Chipotle Mexican Grill, Inc. (NYSE:CMG) in its Q2 2024 investor letter:
“On August 13th, Chipotle Mexican Grill, Inc. (NYSE:CMG) announced that CEO Brian Niccol would be leaving the company to become the CEO of Starbucks. Brian has led a superb turnaround at Chipotle, which has put the company firmly on the path of sustainable long-term growth. While we are disappointed to see Brian go, one of the measures of a great CEO is the company that he leaves behind. Brian has built an extraordinary team at Chipotle that we expect will not lose a step in his departure. We are grateful to Brian for the extraordinary value he has created for CMG shareholders and Pershing Square.
Chipotle delivered outstanding results in the first half of 2024 as the brand’s industry-leading value proposition of fresh food, customization, and convenience at fair prices continues to resonate with customers. During the second quarter, same-store sales grew an impressive 11%, or 55% from 2019 levels. Successful marketing, including the return of the fan-favorite Chicken Al Pastor limited time offering, and faster throughput drove transaction growth of over 8%, with gains across all income cohorts. Although sales growth has moderated in the summer amid a broader deceleration in the restaurant industry, Chipotle continues to gain share. The launch of Smoked Brisket for a limited time starting in September, one of the company’s most requested menu items, should further improve trends….” (Click here to read the full text)
3. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 69
The Coca-Cola Company (NYSE:KO), a global beverage giant, is a well-known household name with a diverse range of products. The company’s strong brand reputation and efficient operations have enabled it to maintain a dominant market position. The stock returned over 4% since the start of the year, becoming one of the best food stocks on our list.
According to analysts, The Coca-Cola Company (NYSE:KO) has successfully navigated inflationary pressures through strategic pricing initiatives. This approach contributed to the company exceeding Wall Street expectations in its third-quarter financial results. Coca-Cola reported a 9% growth in organic revenues and a 5% increase in comparable EPS, showcasing strong performance in both revenue and profitability.
The Coca-Cola Company (NYSE:KO) also has a strong track record of rewarding shareholders through consistent dividend increases, having raised its dividend for 54 consecutive years. With a current dividend yield of 2.85%, the company offers a reliable income stream for investors.
As of Q3 2024, 69 funds reported owning a stake in The Coca-Cola Company (NYSE:KO). Berkshire Hathaway was the leading hedge fund investor in the company, with a stake worth over $28.7 billion.
2. 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.”
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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