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 Starbucks Corporation (NASDAQ:SBUX) 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 barista pouring a freshly brewed cup of coffee from a high-end espresso machine.
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).
Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 76
Starbucks Corporation (NASDAQ:SBUX) is a renowned American multinational chain of coffee houses. The coffee giant started off from a single store in Seattle’s Pike Place Market in 1971 and currently serves as the premier roaster and retailer of specialty coffee globally. With coverage in more than 80 markets, Starbucks offers a wide range of products including coffee, handcrafted beverages, fresh food, and consumer products.
Starbucks Corporation (NASDAQ:SBUX) is a dominant player in the global coffee market and the market share leader in the United States. Starbucks stores in the U.S. and China comprised 61% of the company’s global portfolio, with 16,941 and 7,596 stores in the U.S. and China respectively, at the end of Q4. The company has unlocked an extensive brand reputation for itself by effortlessly delivering a personalized experience in 40,199 stores globally.
Starbucks Corporation (NASDAQ:SBUX) is currently fighting its battle against challenged customer behavior. The firm saw declining global comparable store sales and consolidated net revenues as it closed its fourth quarter of fiscal year 2024. The overall fiscal year marked a lower-than-expected performance, driven by the pronounced traffic decline, a cautious consumer environment, and the firm’s accelerated investments in an expanded range of product offerings and more frequent in-app promotions not improving customer behaviors, in addition to China’s competitive as well as soft macro environment that impacted consumer spending in China.
To cater to the aforementioned issues, the management is developing a solid plan to revive growth for the brand. Reiterating Starbucks’ strength and the new plan, Brian Niccol, chairman and chief executive officer stated
“Our fourth quarter performance makes it clear that we need to fundamentally change our strategy so we can get back to growth and that’s exactly what we are doing with our ‘Back to Starbucks’ plan. I’ve spent my first several weeks in stores engaging with and listening to feedback from our partners and customers. It’s clear that Starbucks is a much-loved brand. We need to focus on what has always set us apart — a welcoming coffeehouse where people gather and where we serve the finest coffee, handcrafted by our skilled baristas”.
Regardless of the current challenges, Starbucks Corporation (NASDAQ:SBUX) has a lot to offer in terms of global and resilient brand equity, robust store network, and endless growth opportunities as one of the largest coffee houses globally.
Overall, SBUX ranks 1st on our list of best coffee stocks to buy according to hedge funds. While we acknowledge the potential of SBUX 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 SBUX 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.