12 Best Grocery Stocks to Buy

Published on December 5, 2022 at 9:54 am by Affan Mir in Hedge Funds, News

In this article, we discuss the 12 best grocery stocks to buy. To skip the industry analysis, go directly to the 5 Best Grocery Stocks to Buy.

Grocery stocks have highly defensive characteristics and remain relatively stable even during tough economic conditions.

According to a research report, the global food & grocery retail market size was valued at $11,324.4 billion in 2021 and is expected to grow at a CAGR of 3% between 2022 and 2030. According to a survey conducted in April, 95% of US customers said that they might make changes in their spending due to rising inflation. 50% of them admitted that they stocked up on essential items when they were on sale.

Despite inflation and tough market conditions, people must eat and buy essentials. This makes grocery stocks better compared to the other sectors in the stock market. Moreover, a lot of the grocery stocks pay dividends which allows investors to gain a steady stream of passive income.

Photo by Franki Chamaki on Unsplash

Our Methodology

After carefully analyzing grocery stocks listed on NYSE and NASDAQ, we compiled a list of 12 grocery stocks that would make a valuable addition to an investor portfolio. These stocks have solid financials and they are popular among the 920 elite hedge funds tracked by Insider Monkey as of the end of the third quarter.

Best Grocery Stocks to Buy

12. Weis Markets, Inc. (NYSE:WMK)

Number of Hedge Fund Holders: 14

Weis Markets, Inc. (NYSE:WMK) is an American retail grocery store with approximately 200 stores across Maryland, New York, Delaware, New Jersey, Pennsylvania, and Virginia and has over 23,000 employees. Weis Markets, Inc. (NYSE:WMK) stock is up 30.66% YTD as of December 2.

In October, Weis Markets, Inc. (NYSE:WMK) declared a 6% increase in its quarterly dividend to $0.34 per share, paid out on November 21 to the shareholders of record on November 7. The company has been increasing its dividend for the past couple of years and has a dividend yield of 1.55% as of December 2.

14 hedge funds held bullish positions in Weis Markets, Inc. (NYSE:WMK) in the third quarter of 2022. Renaissance Technologies remained the most significant shareholder in the company for the 11th consecutive quarter with 375,936 shares worth $26.782 million in Q3 2022.

Amazon.com, Inc. (NASDAQ:AMZN), Costco Wholesale Corporation (NASDAQ:COST), and Dollar General Corporation (NYSE:DG) are some of the best grocery stocks just like Weis Markets, Inc. (NYSE:WMK).

11. Ingles Markets, Incorporated (NASDAQ:IMKTA)

Number of Hedge Fund Holders: 15

Ingles Markets, Incorporated (NASDAQ:IMKTA) is a North Carolina-based supermarket chain. It is one of the best grocery stocks that operates around 200 supermarkets in the Southeastern United States. Apart from supermarkets, the company also operates shopping centers, gas stations, and a milk processing plant.

On November 24, Ingles Markets, Incorporated (NASDAQ:IMKTA) posted its FY2022 results. The company’s net sales were $5.68 billion compared to $4.99 billion in FY2021. Net income totaled $272.8 million, compared with $249.7 million in the previous year. Moreover, gross profit for the year was 24.9% at $1.42 billion and CAPEX was brought down to $119.6 million compared to $140.6 million in the previous year.

Ingles Markets, Incorporated (NASDAQ:IMKTA) is a dividend stock with a yield of 0.65% as of December 2.

As of the third quarter, 15 hedge funds had a stake in Ingles Markets, Incorporated (NASDAQ:IMKTA). Royce & Associates retained the spot as the largest shareholder in the company with 726,786 shares worth $57.569 million.

10. Unilever PLC (NYSE:UL)

Number of Hedge Fund Holders: 21

Unilever PLC (NYSE:UL) is a British consumer goods company that operates globally. It is the largest soap producer in the world. The company also has R&D facilities in the US, UK, China, India, and the Netherlands.

Unilever PLC (NYSE:UL) is one of the best grocery stocks because of its impressive dividend yield of 3.27%. To maximize its shareholder returns, Unilever PLC (NYSE:UL) also authorized a share repurchase program of up to €3 billion to be completed in 2023.

In the third quarter of 2022, 21 hedge funds had a stake in Unilever PLC (NYSE:UL), valued at $708.08 million. Fisher Asset Management increased its holdings in the company by 21% and was the most notable shareholder in the company with close to 7 million shares worth $305.5 million.

Here is what Mayar Capital specifically said about Unilever PLC (NYSE:UL) in its Q2 2022 investor letter:

“In 1895 the Lever brothers created a new brand of hand soap. Inspired by the growing demand for hygiene products, the Lifebuoy brand of soaps was launched to ‘make health infectious’. 128 years later the Lifebuoy brand continues as a leading soap brand – albeit without the coal tar-derived ingredients list. In fact, the market research firm Kantar ranked Lifebuoy as the global #3 most chosen FMCG brand in 2020, just below Coca-Cola (KO) and Colgate (CL) – an astonishing fact given the age of the brand. While the brand is largely absent from shelves here in the UK, it is a juggernaut in Asian markets, and is the #1 brand in India.

There are two observations about the Lifebuoy story which tell us a lot about Unilever PLC (NYSE:UL), which is currently our largest holding in the Fund.

The first is the enduring power of brands in the consumer goods market. According to Kantar’s list of most chosen brands, the top 20 global marques have an average age of 116 years, with over half being founded in the 19th century. Fashions come and go, but there is something special about low-cost consumable goods that advantages strong, time-worn brand names…” (Click here to view full text)

9. Grocery Outlet Holding Corp. (NASDAQ:GO)

Number of Hedge Fund Holders: 22

Grocery Outlet Holding Corp. (NASDAQ:GO) is an American discount grocery retailer with 430 stores spanning California, Oregon, Washington, Idaho, Nevada, Pennsylvania, and New Jersey. Most of the stores owned by the company are run by local married couples. The company is listed on NASDAQ since 2019. It is one of the best grocery stocks as it sells highly discounted products making it easy for consumers to rush to even during high inflation.

On November 9, Deutsche Bank analyst Krisztina Katai reaffirmed a Buy rating on Grocery Outlet Holding Corp. (NASDAQ:GO) and lowered the price target to $41 from $43. In the last three months, 6 analysts have covered Grocery Outlet Holding Corp. (NASDAQ:GO) with an average price target of $37.33 and a Moderate Buy rating. The average price target represents an upside of 21.79% from the current stock price of $30.65 at the time of writing.

In the third quarter, hedge funds rallied towards Grocery Outlet Holding Corp. (NASDAQ:GO) with 22 hedge funds holding positions in the company, compared to 14 in the previous quarter. Marshall Wace LLP retained the spot as the largest stakeholder in the company for the second consecutive quarter after increasing its holdings by 52%.

Here is what Alger Capital specifically said about Grocery Outlet Holding Corp. (NASDAQ:GO):

“Grocery Outlet Holding Corp. (NASDAQ:GO) is a food retailer that sells deeply discounted brand-name consumables, generally providing a 10-50% discount on a total basket of branded goods relative to traditional grocers with 40-70% savings on its “opportunistically sourced” merchandise. The company buys opportunistic consumables in the same way that off-price retailers may buy discounted apparel, which involves capitalizing on cancelled orders, changes to packaging and other strategies. Shares of Grocery Outlet outperformed in the second quarter because the company is viewed by many investors as defensive and a beneficiary of inflation and consumers “trading down.” Additionally, rampant inflation could increase the company’s value proposition and the company has the benefit of passing on higher prices to consumers, given they sell primarily non-discretionary products. Finally, the company has strong unit volume growth, which may be attractive to investors during an economic slowdown.”

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

Number of Hedge Fund Holders: 24

Casey’s General Stores, Inc. (NASDAQ:CASY) owns and operates a chain of convenience stores in the United States. It operates close to 2500 stores across the US, employs over 20,000 people, and is the third largest convenience store in the United States. More than 50% of Casey’s General Stores, Inc. (NASDAQ:CASY) locations are based in rural towns with 5,000 people or less.

On December 1, Wells Fargo analyst Anthony Bonadio reaffirmed an Outperform rating on Casey’s General Stores, Inc. (NASDAQ:CASY) with a price target of $260, up from $245. Bonadio thinks that fuel profits should remain strong, although the upside to the consensus looks minimal.

In the third quarter of 2022, 24 hedge funds held Casey’s General Stores, Inc. (NASDAQ:CASY)’s stock. GLG Partners added the stock to its portfolio in the same quarter and immediately became the largest stakeholder in the company with 144,873 shares worth $29.339 million. Additionally, Renaissance Technologies increased the number of company shares by 2026% in its portfolio. The firm owned 118,872 Casey’s General Stores, Inc. (NASDAQ:CASY)’s shares, worth $24.074 million.

Here is what Upslope Capital had to say about Casey’s General Stores, Inc. (NASDAQ:CASY) in its Q1 2022 investor letter:

“Casey’s General Stores (NASDAQ:CASY): 3rd largest independent convenience store operator in the U.S. and 5th largest pizza chain; unique footprint exclusively focused on the Midwest/South. Growing business with highly defensible model offers good value and significant optionality from organic initiatives and M&A.”

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

Number of Hedge Fund Holders: 37

Dollar Tree, Inc. (NASDAQ:DLTR) is an American retail store company that operates a multi-price-point chain of discount variety stores. The company has over 15,000 stores across the United States and Canada. The company’s business strategy is to attract “financially disadvantaged” customers making it one of the best grocery stocks.

On November 11, Deutsche Bank analyst Krisztina Katai reiterated a Buy rating on Dollar Tree, Inc. (NASDAQ:DLTR) and raised its price target to $194 from $163. Katai said that she is “encouraged” by the company’s sales progress in the third quarter.

For Q3 2022, the company posted a GAAP EPS of $1.20 compared to the $1.17 estimates and reported an enterprise same-store sales increase of 6.5% YoY.

Here is what Madison Funds had to say about Dollar Tree, Inc. (NASDAQ:DLTR) in its Q2 2022 investor letter:

“Dollar Tree, Inc. (NASDAQ:DLTR) reported strong results on the heels of rolling out the $1.25 price point initiative at all Dollar Tree stores nationwide. Furthermore, they announced several executive leadership changes, undoubtedly catalyzed by new Executive Chairman Richard Dreiling. We remain encouraged by the progress to date and are excited to see what the new team can do at Dollar Tree over the coming years.”

6. The Kroger Co. (NYSE:KR)

Number of Hedge Fund Holders: 49

The Kroger Co. (NYSE:KR) is an American retail company that operates over 2700 stores across 35 states in the United States. The company also owns jewelry stores, pharmacies, and medical clinics. In October, The Kroger Co. (NYSE:KR) announced the merger with Albertsons Companies, Inc. (NYSE:ACI) which is expected to close out in 2024.

On December 1, The Kroger Co. (NYSE:KR) reported the best quarterly results since 2020 with a Non-GAAP EPS of $0.88, beating estimates by $0.06. The revenues were up 7.2% YoY to $34.2 billion, beating the estimates by $280 million. Due to solid Q3 results, The Kroger Co. (NYSE:KR) updated its outlook with identical sales without fuel to be in the range of 5.1% to 5.3% and diluted EPS to be in the range of $4.05 to $4.15. The Kroger Co. (NYSE:KR) is a dividend stock that has increased its dividend for the past 15 years. As of December 2, it has a dividend yield of 2.19% compared to the sector average of 1.89%.

Please click to continue reading and see 5 Best Grocery Stocks to Buy.