We recently published a list of the 12 Best Pizza Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where The Chef’s Warehouse, Inc. (NASDAQ:CHEF) stands against other best pizza stocks to buy according to hedge funds.
Overview of the Pizza and Frozen Pizza Market
Pizza is one of the most popular foods in North America. According to the Global Pizza Analysis Report 2024 released by Research and Markets, the global pizza market size was valued at around $148.6 billion in 2023. It is expected to reach $222.5 billion by 2032, growing at a compound annual growth rate (CAGR) of 4.59% between 2023 and 2032. The primary reasons behind this growth are the shifting consumer dietary patterns influenced by rapid westernization, the increasing popularity of online pizza ordering platforms, and the introduction and popularization of healthier product variants, such as gluten-free, vegan, and low-calorie pizza options.
Pizza Today surveyed 748 pizza business owners from across the US to develop the Pizza Industry Trends Report 2024. The report showed that online ordering was becoming the most popular norm in the industry, with 24.91% of respondents investing to upgrade their online ordering technology. In addition, pizzeria owners are directing around 78% of their advertising budgets to social media apps to boost growth and prominence. Around 65% of business owners surveyed showed signs of optimism regarding their annual sales, expecting growth in the next 12 months.
Frozen pizzas are also a significant force in the industry due to their ease of availability, affordability, and convenience. According to Grand View Research, the US frozen pizza market was valued at $6.62 billion in 2022 and is anticipated to grow at a CAGR of 6.9% between 2023 and 2030. Consumers are increasingly shifting to this variety due to hectic lifestyles and other factors such as increased disposable income and a rise in the standard of living.
In addition, frozen pizzas are becoming popular because they offer the same varieties as fresh pizza options, such as cheese pizza, meat pizza, veggie pizza, and more. Gluten-free frozen pizzas are also increasing in popularity due to the growing health consciousness among consumers and the increasing prevalence of gluten allergies, celiac disease, gluten intolerance, and other health reasons. The gluten-free segment is expected to grow with the fastest CAGR among all pizza categories, increasing by 9.2% between 2023 and 2030.
Trends in the Pizza Market
Chicken dominated the toppings segment in the pizza market, with the highest share of more than 30% in 2022, according to statistics by Grand View Research. Companies offering chicken produce and toppings are benefitting from this trend. The popularity of chicken topping has also been supported by the increasing preference for healthier eating and the growth of fast-casual restaurants. However, the fastest growing segment remains to be bacon. The bacon segment is expected to grow at a CAGR of 9.5% between 2023 and 2030.
The regular/restaurant-style pizza segment dominated the market with the highest share, 55%, as of 2022. Furthermore, supermarkets and hypermarkets are the most prominent distribution channels for the pizza market. They had the highest share, more than 30%, in 2022. The primary reason behind this trend is the increasing convenience and variety offered by these channels.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 30 pizza stocks. We also considered cheese and flour stocks. We then selected the top 12 stocks most popular among elite hedge funds. We sourced hedge fund data from Insider Monkey’s database. The stocks are sorted in ascending order of the number of hedge fund holders that have stakes in them as of fiscal Q3 2024.
Why do we care about what hedge funds do? 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).
The Chef’s Warehouse, Inc. (NASDAQ:CHEF)
Hedge Fund Holders: 15
The Chef’s Warehouse, Inc., (NASDAQ:CHEF) is a specialty food product distributor. Its offerings include a range of ingredients and specialty food options, including cheeses, oils, vinegar, produce, charcuterie, and more. It also offers center-of-the-plate products such as seafood, custom-cut beef, hormone-free poultry, flour, eggs, butter, cooking oils, and other items useful for making pizzas.
The company’s net sales increased to $931.5 million in fiscal Q3 2024, 5.6% more than in fiscal Q3 2023. Demand and business trends improved sequentially throughout fiscal Q3 2024, driving profitability.
The Chef’s Warehouse, Inc.’s (NASDAQ:CHEF) operating divisions are strong across domestic and international markets. Gross profit increased 8.2% to $224.7 million in fiscal Q3 2024 compared to $207.7 million in fiscal Q3 2023. This growth was primarily driven by increased sales and price inflation. The company is also delivering continued progress in increasing relevance with its customer base with strong year-over-year growth in unique item placements.
Based on its current business trends, The Chef’s Warehouse, Inc. (NASDAQ:CHEF) estimates net sales in the range of $3.94 billion and $4.04 billion for fiscal year 2025. Analysts are of the view that high-end diners are expected to remain unaffected by a potential recession, which is why they are bullish on the stock and have a consensus Buy rating for it. It ranks 12th on our list of the 12 best pizza stocks to buy according to hedge funds.
Wasatch Micro Cap Value Strategy made the following comment about The Chefs’ Warehouse, Inc. (NASDAQ:CHEF) in its Q3 2023 investor letter:
“The Chefs’ Warehouse, Inc. (NASDAQ:CHEF) was also a detractor. The company distributes premium specialty foods primarily to chefs who own or operate restaurants, catering services, and fine-dining establishments. While restaurant stocks have generally been weak since the end of 2021, Chefs’ stock had held up well until succumbing in the third quarter of this year due to concerns about the possibility of soft consumer spending ahead. We don’t take these concerns lightly, especially since Chefs’ management hasn’t made a compelling counterargument. But the company is valued at only about eight times EBITDA, which we consider inexpensive. And we think high-end diners will be relatively unaffected by a potential recession because eating out is an affordable luxury for them.”
Overall, CHEF ranks 12th on our list of the best pizza stocks to buy according to hedge funds. While we acknowledge the potential of pizza stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CHEF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock
Disclosure: None. This article is originally published at Insider Monkey.
