In this article, we will take a look at the 10 best coffee stocks to invest in. You can skip our comprehensive analysis of the coffee industry, and go directly to the 5 Best Coffee Stocks to Invest In.
The $100 billion coffee industry was one of the sectors hit hard by the pandemic-led recession, yet demand remained robust despite the global lockdowns. According to a survey conducted by the National Coffee Association (NCA), coffee sales soared in the first weeks of the lockdown, which began in March 2020, but plummeted by 15% in September, while online coffee revenue increased by 57%. Although 75 percent of coffee drinkers say the pandemic has not affected their coffee consumption, there is no doubt that specialty coffee consumption in coffee shops and restaurants has decreased during the worldwide lockdown.
Major coffee players are revamping their strategies all over the world to boost sales and increase their digital presence.
Last year was not a good year for fast-food giant McDonald's Corporation (NYSE:MCD). But the Chicago-based McCafe operator is putting up a fight after reporting a 57% increase in second-quarter revenue to $5.9 billion, due to high demand for the BTS meal and a new chicken sandwich that drove same-store sales growth in the United States. McDonald's Corporation (NYSE:MCD) said in November 2020 that it will invest $380 million in China to open 4,000 McCafes by 2023 to meet the growing local demand for premium coffee. Shares of McDonald's Corporation (NYSE:MCD) climbed 16% in the last twelve months.
Starbucks Corporation (NASDAQ:SBUX) reported that mobile orders through the company's app accounted for 25% of all transactions at Starbucks shops in the United States in the third quarter of 2021. The coffee giant's third-quarter revenue grew 78% to $7.5 billion, beating estimates of $7.29 billion. Cold beverages such as Nitro cold brew accounted for nearly three-quarters of Starbucks Corporation's (NASDAQ:SBUX) beverage sales. Shares of Starbucks Corporation's (NASDAQ:SBUX) climbed 60% in the last twelve months.
Nestle S.A. (OTC:NSRGY) saw a 14.3% revenue increase to $3.5 billion in Nespresso products alone, as reported in the first half of 2021. Nestle S.A. (OTC:NSRGY) announced net sales of $46.3 billion for the first half of the year, with robust demand for Nespresso, Nescafé, and Starbucks products making up the majority of the organic growth. Nestle S.A. (OTC:NSRGY) stock has gained 7.1% in the last three months.
Among the biggest coffee companies that thrived during the pandemic are Yum China Holdings, Inc. (NYSE:YUMC), Monster Beverage Corporation (NASDAQ:MNST), and The J.M. Smucker Company (NYSE:SJM).
The J.M. Smucker Company (NYSE:SJM) saw a robust increase in demand after the pandemic. The company's coffee segment accounted for $2.37 billion of the total revenue in 2021. Shares of The J.M. Smucker Company (NYSE:SJM) increased 16% in the last year. Meanwhile, shares of Yum China Holdings, Inc. (NYSE:YUMC) and Monster Beverage Corporation (NASDAQ:MNST) climbed 17% and 10%, respectively, in the last twelve months.
Although the post-pandemic environment has benefited coffee chains and consumer packaged goods producers, the International Coffee Organization (ICO) estimates that coffee prices will rise globally due to low supply and supply chain disruptions. With the availability of vaccines, the world's coffee consumption is expected to climb by 1.9% to 167.2 million bags in 2020-2021, compared to 164.1 million bags in the year 2019-2020, according to ICO.
Just like the coffee industry, the hedge fund industry is also facing the shock of the pandemic. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and May 29th, 2021 our monthly newsletter’s stock picks returned 206.8%, vs. 91.0% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
10 Best Coffee Stocks to Invest In
Pixabay/Public Domain
Our Methodology
The stocks on our list were picked based on their fundamentals and prospects for growth based on key business characteristics. We also took into account analysts’ ratings and hedge fund sentiment to pick out the stocks most popular among the hedge funds tracked by Insider Monkey.
We start our list of the best coffee stocks to invest in with Coffee Holding Co., Inc. (NASDAQ:JVA). The New York-based company was established in 1971 and began publicly trading in 2005. Coffee Holding Co., Inc. (NASDAQ:JVA) distributes organic and green coffee through its Wholesale Green Coffee, Private Label Coffee, and Branded Coffee.
In June, Coffee Holding Co., Inc. (NASDAQ:JVA) purchased its 50,000-square-foot roasting facility from the city of La Junta in Colorado. The purchase will support the firm's operational performance and save over $100,000 in annual rent costs. Shares of Coffee Holding Co., Inc. (NASDAQ:JVA) increased 13% in the last month.
The company has a market cap of $33.05 million. In the first quarter of 2021, Coffee Holding Co., Inc. (NASDAQ:JVA) reported an EPS of $0.12, beating the $0.11 per share EPS of the same period in 2020. The company's revenue in the first quarter came in at $18.13 million, a decrease from $19.26 million in the same period of 2020. However, the company expects to see a restoration of positive quarter-over-quarter revenue growth as businesses continue to reopen. Shares of Coffee Holding Co., Inc. (NASDAQ:JVA) rose 98% in the last twelve months.
By the end of the first quarter of 2021, 2 hedge funds out of the 866 tracked by Insider Monkey held stakes in Coffee Holding Co., Inc. (NASDAQ:JVA), worth roughly $3.90 million.
Nestle S.A. (OTC:NSRGY) ranks 9th on the list of 10 best coffee stocks to invest in. The Switzerland-based food and beverage company offers various products such as pharmaceuticals products, frozen food, pet products, and coffee products through its Nespresso and Nescafe brands. Nestle S.A.'s (OTC:NSRGY) products are being offered in over 190 countries worldwide.
Earlier this year, Nestle S.A. (OTC:NSRGY) announced a partnership with Starbucks Corporation (NASDAQ:SBUX). The coffee giants are set to develop Starbucks ready-to-drink (RTO) beverages that will be distributed in Southeast Asia, Oceania, and Latin America. The collaborated brew is set to hit the market in 2022.
On July 2nd, Deutsche Bank analyst Tom Sykes raised Nestle S.A.'s (OTC:NSRGY) price target to $130 per share from $115 per share and kept a Hold rating on the stock. Shares of Nestle S.A. (OTC:NSRGY) rose 7% year to date.
The company has a market cap of $357.20 billion. In the first quarter of 2021, Nestle S.A.'s (OTC:NSRGY) revenue came in at $23 billion, up 2.1% from $22.67 in the same period of 2020.
Just like Restaurant Brands International (NYSE:QSR),Keurig Dr Pepper Inc. (NASDAQ:KDP),Starbucks Corporation (NASDAQ:SBUX), McDonald's Corporation (NYSE:MCD), Monster Beverage Corporation (NASDAQ:MNST), Yum China Holdings, Inc. (NYSE:YUMC) and The J.M. Smucker Company (NYSE:SJM), Nestle S.A. (OTC:NSRGY) is one of the best coffee stocks to buy now.
There were 4 hedge funds that reported owning stakes in Nestle S.A. (OTC:NSRGY) at the end of the first quarter. The total value of these stakes at the end of Q1 is $1.64 billion.
Farmer Brothers Company (NASDAQ:FARM) ranks 8th on the list of 10 best coffee stocks to invest in. The Texas-based food service company was founded in 1912 and specializes in the production of coffee and tea. Farmer Brothers Company (NASDAQ: FARM) has over 110 local branches.
In April, Farmer Brothers Company (NASDAQ:FARM) completed a new $127.5 million, four-year financing deal that includes an $80.0 million revolving credit facility and a $47.5 million term loan due April 2025. The deal increased the borrowing capacity of the company. Shares of Farmer Brothers Company (NASDAQ:FARM) rose 109% year to date.
In March, B. Riley Securities analyst Kara Anderson upgraded Farmer Brothers Company (NASDAQ:FARM) to a Buy rating from a Neutral rating and with a $12.50 per share price target. The analyst commented that the re-opening of important states is in favor of the company's recovery.
Just like Keurig Dr Pepper Inc. (NASDAQ:KDP),Restaurant Brands International (NYSE:QSR),Starbucks Corporation (NASDAQ:SBUX), Nestle S.A. (OTC:NSRGY), McDonald's Corporation (NYSE:MCD), Monster Beverage Corporation (NASDAQ:MNST), Yum China Holdings, Inc. (NYSE:YUMC) and The J.M. Smucker Company (NYSE:SJM), Farmer Brothers Company (NASDAQ:FARM) is one of the best coffee stocks to buy now.
The company has a market cap of $174.48 million. In the fiscal third quarter of 2021, Farmer Brothers Company (NASDAQ:FARM) reported an EPS of $0.78, missing estimates of $2.32 in the same period of 2020. The company's revenue in the fiscal third quarter was $93.15 million, a decrease from $129.14 million in the same period of 2020. However, the company is positive that sales will return to pre-pandemic levels as the world continues to recover and the reported quarter sales were the most stable results since the pandemic. Shares of Farmer Brothers Company (NASDAQ:FARM) have gained 103% in the last twelve months.
There were 10 hedge funds that reported owning stakes in Farmer Brothers Company (NASDAQ:FARM) at the end of the first quarter. The total value of these stakes at the end of Q1 is $27.53 million.
Choice Equities Capital Management mentioned Farmer Brothers Company (NASDAQ:FARM) in its Q1 2021 investor letter. Here is what the fund said:
“FARM – One of those other new holdings is Farmer Brothers, Inc., though this one seems to offer higher upside if our expectations of improvement in profitability prove to be on the mark. As one of just six coffee roasters and distributors in the United States, the longtime family run company has produced reliable profits for most of its 100-year existence. But the last few years have certainly been trying. Beginning in 2018, prior management bungled a sorely needed transition from its severely antiquated roasting facilities, resulting in stockouts, cost overruns and a general inability to get coffee beans to its end
Restaurant Brands International (NYSE:QSR) ranks 7th on the list of 10 best coffee stocks to invest in. The Georgia-based food and beverage conglomerate is the owner of many food chains such as Burger King and Popeye's. Restaurant Brands International (NYSE:QSR) also purchased Canadian coffee shop Tim Hortons in 2014.
Earlier this year, Tim Hortons invested over $63 million to enhance their products and launch more products on their menu. Shares on Restaurant Brands International (NYSE:QSR) jumped 18% over the last twelve months.
On August 3rd, Deutsche Bank analyst Brian Mullan raised Restaurant Brands International's (NYSE:QSR) price target to $81 per share from $79 previously and kept a Buy rating. The analyst mentioned that he favors the stock's risk/reward ratio.
The company has a market cap of $30.92 billion and offers a dividend yield of 3.17%. The company reported a second-quarter adjusted EPS of $0.77, beating consensus EPS of $0.61. Restaurant Brands International's (NYSE:QSR) revenue was $1.44 billion, beating consensus estimates of $1.15 billion.
Just like Keurig Dr Pepper Inc. (NASDAQ:KDP),Starbucks Corporation (NASDAQ:SBUX), Nestle S.A. (OTC:NSRGY), McDonald's Corporation (NYSE:MCD), Monster Beverage Corporation (NASDAQ:MNST), and Yum China Holdings, Inc. (NYSE:YUMC), Restaurant Brands International's (NYSE:QSR) is one of the best coffee stocks to buy now.
By the end of the first quarter of 2021, 26 hedge funds out of the 866 tracked by Insider Monkey held stakes in Restaurant Brands International (NYSE:QSR), worth roughly $2.25 billion.
Pershing Square Holdings Ltd mentioned Restaurant Brands International (NYSE:QSR) in its Q4 2020 investor letter. Here is what the fund said:
“QSR’s franchised business model is a high-quality, capital-light, growing annuity that generates high-margin brand royalty fees from three leading brands: Burger King, Tim Hortons and Popeyes. The company nimbly navigated difficult market conditions in 2020 by assisting franchisees, while maintaining its long-term growth potential.
Ranking 6th in the list of best coffee stocks to invest in is beverage maker Keurig Dr Pepper Inc. (NASDAQ:KDP). The Texas-based company was formerly known as Keurig Green Mountain and was founded in 2018. Keurig Dr Pepper Inc. (NASDAQ:KDP) offers over 125 brands including Green Mountain Coffee Roasters and The Original Donut Shop.
In 2020, Keurig Dr Pepper Inc. (NASDAQ:KDP) purchased caffeinated sparkling water manufacturer Limitless. The acquisition will help broaden the availability of Limitless items which are already being sold in Walmart Inc. (NYSE:WMT). Shares of Keurig Dr Pepper Inc. (NASDAQ:KDP) rose 14% in the last twelve months.
In June, Wells Fargo analyst Chris Carey upgraded Keurig Dr Pepper Inc. (NASDAQ:KDP) to an Overweight rating from an Equal Weight rating with a $42 per share price target. Keurig Dr Pepper Inc. (NASDAQ:KDP) was also upgraded by JPMorgan analyst Andrea Teixeira to an Overweight rating from a Neutral rating with a $39 per share price target.
The company has a market cap of $48.75 billion and offers a dividend yield of 2.18%. In the second quarter of 2021, Keurig Dr Pepper Inc. (NASDAQ:KDP) reported an adjusted EPS of $38, beating estimates by $0.01. The company's second-quarter 2021 revenue came in at $3.14 billion, beating the consensus estimates of $3.05 billion.
Just like Restaurant Brands International (NYSE:QSR),Starbucks Corporation (NASDAQ:SBUX), Nestle S.A. (OTC:NSRGY), The J.M. Smucker Company (NYSE:SJM), McDonald's Corporation (NYSE:MCD), Monster Beverage Corporation (NASDAQ:MNST) and Yum China Holdings, Inc. (NYSE:YUMC), Keurig Dr Pepper Inc. (NASDAQ:KDP) is one of the best coffee stocks to buy now.
At the end of the first quarter of 2021, 30 hedge funds in the database of Insider Monkey held stakes worth $934 million in Keurig Dr Pepper Inc. (NASDAQ:KDP).
“Our underweights in health care and staples contributed to relative performance during the period. We also prefer to act with some caution in a sector where regulatory risks persist. In consumer staples, we are broadly finding valuations uncompelling and sold Keurig Dr Pepper during the quarter.”