We recently compiled a list of the 7 Best Coffee Stocks to Buy Now. In this article, we are going to take a look at where Restaurant Brands International, Inc. (NYSE:QSR) stands against the other coffee stocks.
Coffee is one of the most widely consumed beverages globally, however, not many investors are bullish on coffee stocks right now as AI seems to be getting all the attention. The coffee market is growing and estimates by Mordor Intelligence valued it at $132.13 billion in 2024. The market is expected to grow to $166.39 billion by 2029, at a compound annual growth rate of 4.72% over the forecast period.
Consumers are currently worried since coffee sellers have predicted that the already high prices will spike even more in the near future. Supply disruptions from Vietnam to Brazil have resulted in high prices for the Arabica and Robusta beans. The reasons behind the surge in prices are diverse. While weather conditions in major coffee bean exporting nations including Brazil and Vietnam have impacted the size and quality of the arabica beans, rising demand in markets such as China also tightened the supply. Considering the fact that Arabica beans are preferred by coffee giants and Robusta beans are best for instant coffee, there is no sense of relief for the end consumers who are paying for their daily dose of coffee.
Prevailing Trends in the Market
As reported by the World Bank, the beverage price index hit a 13-year high in February as a result of the surging prices of Robusta coffee and cocoa. Coffee Arabica and Coffee Robusta prices hit $4.61 and $3.38 per kilogram, respectively. The reaction of the industry to these prices has been diverse. While some suppliers have warned consumers of further price hikes for their products, other coffee chains are finding store closures convenient. The competition for supplies continues to rise as the demand for coffee in non-traditional markets is expanding. While the dynamics of the market have shifted to more online orders or drive-throughs, some critics mention coffee brands have let go of the idea of offering premium customer service in stores.
The real question revolves around what the coffee industry holds for consumers in the future. While many believe that the price hikes will not be so severe, the underlying challenge penetrating coffee-producing regions is climate change and not just bad weather. Although pests and diseases due to heavy rainfall impacted the coffee yield in Brazil, just like the high temperature in Vietnam, the issue is more dense. Considering the fact that such regions can become unusable by 2050 if the circumstances persist, the coffee industry remains under serious threat.
The coffee market may be under pressure but it goes without saying that caffeine is a staple in today’s high-paced world. Whatever challenges persist, products from top coffee companies will continue to be on the shelves of retail stores and in the kitchen cabinets of consumers. Coffee stocks might even be ideal for recession-proofing your portfolio. With that, let’s dive into the 7 best coffee stocks to buy now.
Our Methodology:
In order to compile a list of the 7 best coffee stocks to buy now, we first sifted through ETFs and online rankings to gather a preliminary list of 20 coffee stocks. We then selected the top 7 stocks that had the highest number of hedge fund holders as of March 31. The 7 best coffee stocks to buy now are arranged in ascending order of their number of hedge fund holders, as of the first quarter of 2024. We have also included analysts’ average upside potential for the stocks in our list.
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 best hedge funds. Our quarterly newsletter’s strategy picks 14 small and large-caps every quarter and it has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a hamburger, french fries, and a soft drink, representing the fast food chain.
Restaurant Brands International, Inc. (NYSE:QSR)
Number of Hedge Fund Holders: 22
Average Upside Potential as of July 31: 23.43%
Restaurant Brands International, Inc. (NYSE:QSR) is one of the largest quick-service restaurant companies globally. The company is the owner of popular quick-service restaurant brands including TIM HORTONS, BURGER KING, POPEYES, and FIREHOUSE SUBS. Coffee serves as the core to the widely known Tim Hortons which has been in operation since 1964, has over 5,800 restaurants, and covers over 15 markets. Other than premium coffee, the brand’s menu extends to hot and cold specialty drinks, specialty teas, fruit smoothies, fresh baked goods, and prepared foods.
Restaurant Brands International, Inc. (NYSE:QSR) is a growth company that has managed to build some of the most iconic brands worldwide while offering a strong track record of system-wide sales growth. With over 30,000 restaurants in more than 120 countries and territories, the company has over $40 billion in annual system-wide sales. It continues to accelerate its franchisee profitability through strong financial performance to drive reinvestment in restaurants as well as growth. The company closed the first quarter of 2024 with solid growth in system-wide sales which resulted in bottom-line growth for franchisees and the company. Additionally, the future growth outlook for the company for 2028 points to at least $60 billion in system-wide sales.
The company’s coffee segment Tim Hortons is a restaurant leader in Canada and is most famous for its brewed coffee and has over 70% market share. Breakfast, sandwiches, and wraps from the brand have over 60% market share while baked goods account for more than 65% market share. Other than the strong regional market share of its coffee brand, Restaurant Brands International, Inc. (NYSE:QSR) has an extensive runway for its global restaurant expansion. The company is all set to benefit from China, one of the fastest-growing coffee markets. In July, Restaurant Brands International, Inc. (NYSE:QSR) announced a co-investment of up to $50 million of capital alongside Cartesian Capital in Tims China, the parent company of the exclusive master franchisee of Tim Hortons coffee shops in China, Hong Kong, and Macau. The emerging local coffee champion Tims China aims to open over 2,750 stores by 2026.
Based on the company’s ability to translate its value proposition into robust profitability and further grow that profitability through global expansion, it serves as a promising coffee stock to invest in. As of March 31, Pershing Square is the largest shareholder in the company with a stake worth $1.85 billion. Overall, the stock was part of 22 investors’ portfolios.
Overall QSR ranks 4th on our list of the best coffee stocks to buy. You can visit 7 Best Coffee Stocks to Buy Now to see the other coffee stocks that are on hedge funds’ radar. While we acknowledge the potential of QSR as an investment, 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 QSR 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.