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 Keurig Dr. Pepper Inc. (NASDAQ:KDP) 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 conveyor belt filled with assorted K-Cup pods, ready for packaging.
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).
Keurig Dr Pepper Inc. (NASDAQ:KDP)
Number of Hedge Fund Holders: 38
Keurig Dr. Pepper Inc. (NASDAQ:KDP) is a leading beverage company in North America that has a portfolio of over 125 owned, licensed, and partner brands. The company offers ready-to-drink beverages catering to diverse tastes including carbonated soft drinks, tea, still or sparkling water, juice, and non-alcoholic mixers. In the ready-to-brew category, specialty coffee and other specialty beverages in K-Cup pods are offered.
Keurig boasts a leadership position in liquid refreshment beverages, including soft drinks, specialty coffee and tea, water, juice and juice drinks and mixers, and markets the top single serve coffee brewing system in the US and Canada. A consumer-centric innovation model is what has helped Keurig Dr. Pepper capture the market of 45 million North American coffee consumers who use Keurig brewers. The company is known for transforming the way consumers brew coffee through the introduction of the K-Cup pod single serve coffee system.
Driven by the strong US Refreshment Beverages segment and international momentum, Keurig closed a solid Q3. Net sales for the third quarter rose 2.3% to $3.9 billion. The firm looks forward to a strong finish to 2024 and a healthy 2025 based on an improvement in its volume/mix performance despite a muted operating environment and cost discipline throughout the organization.
In the US coffee segment, Keurig Dr. Pepper Inc. (NASDAQ:KDP) continued progress despite a soft recent quarter, positioning the firm for success when the category recovers. Other than having a healthy pod market share, KDP witnessed double-digit brewer unit growth which reflects stabilizing coffeemaker category trends and ongoing share gains.
Overall, KDP ranks 4th on our list of best coffee stocks to buy according to hedge funds. While we acknowledge the potential of KDP 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 KDP 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.