We recently compiled a list of the 10 Best Performing Stocks in 2024. In this article, we are going to take a look at where CAVA Group Inc. (NYSE:CAVA) stands against the other great-performing stocks.
Dow Breaks Record
The Dow Jones Industrial Average has recently made headlines by closing above the 42,000 mark for the first time, a significant milestone that reflects a surge in investor confidence following a substantial interest rate cut by the Fed. This momentous achievement occurred on September 19, when the Dow jumped over 500 points, closing at 42,063.36. This rise was part of a broader trend in the stock market, with major indices experiencing overall gains throughout the week, largely fueled by optimism surrounding the Fed’s decision to lower interest rates by 0.5%.
On September 21, Edward Yardeni, president of Yardeni Research, while acknowledging that the market tends to keep rising, also discussed the warning signs of a melt-up, in the context of the markets’ response to the September rate cut on CNBC’s ‘Closing Bell’. He doubted the necessity of such a large rate cut, suggesting that the economy is currently growing at about 3% year-over-year and could potentially grow even faster. Yardeni noted that while productivity gains are expected to be more pronounced shortly, he would have preferred to see the market stabilize for a while instead of continuing its upward trajectory.
Yardeni provided his forecast for the market’s potential growth. In his base case scenario, he predicted that the Dow could reach 5,800 possibly by next week. However, he also entertained an alternative scenario where the market might exceed 6,000 before experiencing a correction. Still, he does not foresee a bear market as a recession is unlikely.
While discussing investment strategies, Yardeni highlighted that with small-cap and mid-cap stocks showing signs of improvement in valuations, there is an indication that investors should consider diversifying their portfolios beyond large-cap stocks. However, concerns remain regarding mid-cap earnings, which have not shown significant growth recently. Lower interest rates might eventually provide some uplift to these earnings.
Chicago Fed President Austan Goolsbee has indicated that many more rate cuts may be necessary over the next year due to signs of weakness in the manufacturing sector. CNBC’s Rick Santelli, who was reporting on September 23, noted that while manufacturing has faced challenges, there are indications it might be recovering slightly, as evidenced by a recent production increase of 0.8%.
He referenced comments from Treasury Secretary Janet Yellen, who stated that the economy is experiencing strong growth and robust consumer spending, which he believed contradicted the concerns raised by Goolsbee. Santelli pointed out that the Dow Jones Industrial Average is currently at all-time highs, suggesting that market sentiment remains positive despite underlying economic weaknesses.
Further discussing the economic landscape, he remarked on the currency markets, noting that the US dollar has fallen to its lowest level since March 2022. In contrast, the euro has reached its strongest level since April 2022. This shift in currency dynamics reflects broader economic trends, with Santelli suggesting that Germany’s economic situation appears significantly weakened compared to its previous state.
On the topic of interest rates, Santelli reported that since Tuesday’s market close and following the Fed’s easing on Wednesday, two-year note yields have decreased by 3 basis points, while ten-year note yields have increased by ~9 basis points. He emphasized the importance of monitoring these changes closely as they could indicate shifting investor sentiment regarding future economic conditions.
While Santelli’s discussion underscores a complex economic environment where mixed signals from various sectors create uncertainty, the Dow continues to hover around its record highs and investor sentiment remains cautiously optimistic. Market participants are closely monitoring economic indicators and Fed policies to capture future trends. In this context, we’re here with a list of the 10 best-performing stocks in 2024.
Methodology
We used stock screeners to look for companies trading over $10 billion. We then selected the top 10 stocks with the best year-to-date performance and that were also the most popular among elite hedge funds. The stocks are ranked in ascending order of their year-to-date performance.
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).
A close-up image of a colorful salad platter with toppings and dressings.
CAVA Group Inc. (NYSE:CAVA)
Year-to-Date Performance as of September 23: 203.23%
Market Cap as of September 23: $14.85 billion
Number of Hedge Fund Holders: 33
CAVA Group Inc. (NYSE:CAVA) operates a category-defining Mediterranean fast-casual restaurant brand that operates approximately 309 fast-casual CAVA restaurants across the US, excluding two locations operating under a licensing arrangement and digital kitchens. It’s known for its fresh, flavorful dishes, including customizable bowls, pita sandwiches, and salads.
The company expanded its US presence with 18 new locations in the second quarter (ending Q2 with 341 restaurants), driving a 14.40% increase in overall same-store sales, and plans to open 54-57 more by the end of the year. Despite the challenges faced by many restaurant stocks, it has demonstrated strong profitability, with a 27% profit margin in the second quarter. Overall, Q2 2024 recorded $233.50 million in revenue, up 35.05% from the year-ago period.
Its recent expansion into Chicago has been particularly successful, with three locations now open, contributing significantly to its overall growth. The recent launch of grilled steak has exceeded expectations and is driving sales growth. The social media campaign for this launch generated 8.6 million+ social impressions and 300 million+ PR impressions. The company offers high-quality Mediterranean cuisine at affordable prices and has differentiated itself from traditional restaurants.
Analysts anticipate that the company will achieve an 18.6% increase in earnings next year, highlighting the company’s strong market position and appeal to health-conscious consumers. CAVA Group Inc.’s (NYSE:CAVA) strategic focus on customer loyalty, operational efficiency, and team development positions it for continued growth and success.
Next Century Growth Small Cap Strategy stated the following regarding CAVA Group, Inc. (NYSE:CAVA) in its first quarter 2024 investor letter:
“CAVA Group, Inc. (NYSE:CAVA) is a fast casual restaurant chain serving authentic Mediterranean cuisine, featuring customizable bowls and pitas. CAVA currently owns and operates >300 stores, and the company targets a 15% plus new store growth rate. The intermediate goal is to have 1,000 stores by 2032 with plenty of opportunity to grow beyond that level. The company already delivers solid restaurant level margins >20% and they believe 3-5% same store sales growth is achievable over time. As the business matures, they should be able to leverage G&A expense which should lead to strong earnings growth over many years.”
Overall CAVA ranks 4th on our list of the best performing stocks in 2024. While we acknowledge the potential of CAVA as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CAVA 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.
