We recently compiled a list of the 10 Best Coffee Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Dutch Bros (NYSE:BROS) stands against the other best coffee stocks to buy according to hedge funds.
The Global Coffee Market Continues to Struggle
According to a report by Mordor Intelligence, the global coffee market size is estimated at $132.13 billion in 2024 and is expected to grow to $166.39 billion by 2029, growing at a compound annual growth rate of 4.72% during the forecast period. Over the last 2 years, coffee prices have hit multi-year peaks. Reuters reports that global coffee prices have risen to their highest in nearly 50 years. This has been the result of poor weather in Brazil and Vietnam.
Brazil produces almost half the world’s high-end beans used primarily in roast and ground blends. The country has been the victim of one of its worst droughts on record this year. While rains did come in the month of October, they might have been too late. According to farmers and agronomists, the coffee trees are unable to recover for the 2025 crop. The next crop is not expected to be big. It is believed that coffee trees that have suffered from the dryness would be using energy to produce leaves, instead of fruits, after the rain. This means that there will be barely enough energy in the crops to develop fruits after flowering.
The other major coffee producer Vietnam produces roughly 40% of the robusta beans used to make instant coffee. The country was subjected to a severe drought earlier in 2024 which was followed by excess rains since October, with the current harvest following 3 years of supply deficits.
How’s the End Market Likely to Suffer?
The soaring coffee prices are casting their impact across the value chain as they hurt roasters and cafes and eventually the customers. Consumers are expected to see the price spike in 6 to 12 months since roasters tend to buy coffee months in advance. The Nescafe and Nespresso maker Nestlé has decided to raise prices and make bags smaller with beans getting expensive. Especially for the American coffee enthusiast, imported goods such as coffee beans are likely to witness markups if the new administration decides to impose tariffs on coffee-producing countries. Before the potential price hikes from tariffs hit, many Americans are already stockpiling various goods including coffee.
A closeup of a customer tasting a freshly-made cold brew coffee product from the company’s shop.
Our Methodology
In order to compile a list of the 10 best coffee stocks to buy according to hedge funds, we went through stock screeners, relevant ETFs, and media reports to make a list of coffee stocks. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best coffee stocks to buy according to hedge funds have been arranged in ascending order of their hedge fund holders as of Q3.
At Insider Monkey we are obsessed with 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).
Dutch Bros Inc. (NYSE:BROS)
Number of Hedge Fund Holders: 37
Dutch Bros (NYSE:BROS) came into being in 1992 as a pushcart when the founders Dane and Travis Boersma decided to sell Expresso in downtown Grants Pass, Oregon. The company grew over the years with the first franchise opening in Oregon in 2000. Currently, Dutch Bros is a high-growth operator and franchisor of drive-thru shops that serve beverages. Dutch Bros has coffee classics, protein coffee, seasonal drinks, shakes, smoothies, and snacks among others to offer to its customers.
Although Dutch Bros doesn’t have a market share as compared to incumbents such as Starbucks, what deems Dutch Bros attractive is its exemplary growth story. The company expanded from a double-head espresso machine and a pushcart to 950 locations across 18 states. The firm is one of the fastest-growing brands in the quick service American beverage industry by location count.
Dutch Bros’ growth story, hand-crafted and high-quality beverages, and its unique drive-thru experience are complemented by its community-driven, people-first culture. Dutch Bros believes the firm to be more than the products it serves. The sense of community engagement boasted by the firm fosters loyalty among its customers.
The brand continues to resonate with customers as it recently witnessed the highest same shop transaction growth quarter in two years. With a 28% revenue increase and a 2.7% systemwide same shop sales growth, the firm closed the third quarter. The growth story continues for Dutch Bros with the opening of 38 new shops during the quarter.
Overall, BROS ranks 5th on our list of best coffee stocks to buy according to hedge funds. While we acknowledge the potential of BROS as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than BROS 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.