We recently compiled a list of the 7 Best Coffee Stocks to Buy Now. In this article, we are going to take a look at where BRC Inc. (NYSE:BRCC) stands against the other coffee stocks.
Coffee is one of the most widely consumed beverages globally, however, not many investors are bullish on coffee stocks right now as AI seems to be getting all the attention. The coffee market is growing and estimates by Mordor Intelligence valued it at $132.13 billion in 2024. The market is expected to grow to $166.39 billion by 2029, at a compound annual growth rate of 4.72% over the forecast period.
Consumers are currently worried since coffee sellers have predicted that the already high prices will spike even more in the near future. Supply disruptions from Vietnam to Brazil have resulted in high prices for the Arabica and Robusta beans. The reasons behind the surge in prices are diverse. While weather conditions in major coffee bean exporting nations including Brazil and Vietnam have impacted the size and quality of the arabica beans, rising demand in markets such as China also tightened the supply. Considering the fact that Arabica beans are preferred by coffee giants and Robusta beans are best for instant coffee, there is no sense of relief for the end consumers who are paying for their daily dose of coffee.
Prevailing Trends in the Market
As reported by the World Bank, the beverage price index hit a 13-year high in February as a result of the surging prices of Robusta coffee and cocoa. Coffee Arabica and Coffee Robusta prices hit $4.61 and $3.38 per kilogram, respectively. The reaction of the industry to these prices has been diverse. While some suppliers have warned consumers of further price hikes for their products, other coffee chains are finding store closures convenient. The competition for supplies continues to rise as the demand for coffee in non-traditional markets is expanding. While the dynamics of the market have shifted to more online orders or drive-throughs, some critics mention coffee brands have let go of the idea of offering premium customer service in stores.
The real question revolves around what the coffee industry holds for consumers in the future. While many believe that the price hikes will not be so severe, the underlying challenge penetrating coffee-producing regions is climate change and not just bad weather. Although pests and diseases due to heavy rainfall impacted the coffee yield in Brazil, just like the high temperature in Vietnam, the issue is more dense. Considering the fact that such regions can become unusable by 2050 if the circumstances persist, the coffee industry remains under serious threat.
The coffee market may be under pressure but it goes without saying that caffeine is a staple in today’s high-paced world. Whatever challenges persist, products from top coffee companies will continue to be on the shelves of retail stores and in the kitchen cabinets of consumers. Coffee stocks might even be ideal for recession-proofing your portfolio. With that, let’s dive into the 7 best coffee stocks to buy now.
Our Methodology:
In order to compile a list of the 7 best coffee stocks to buy now, we first sifted through ETFs and online rankings to gather a preliminary list of 20 coffee stocks. We then selected the top 7 stocks that had the highest number of hedge fund holders as of March 31. The 7 best coffee stocks to buy now are arranged in ascending order of their number of hedge fund holders, as of the first quarter of 2024. We have also included analysts’ average upside potential for the stocks in our list.
Why are we interested in 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 best hedge funds. Our quarterly newsletter’s strategy picks 14 small and large-caps every quarter and it has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A cup of the company’s signature coffee being brewed in a state-of-the-art espresso machine.
BRC Inc. (NYSE:BRCC)
Number of Hedge Fund Holders: 10
Average Upside Potential as of July 31: 26.70%
BRC Inc. (NYSE:BRCC), the Black Rifle Coffee Company, is an American coffee business which was founded by former U.S. Army Green Beret Evan Hafer in 2014. The Veteran-founded and operated company is based in Salt Lake City, Utah. The company imports coffee beans directly from Colombia and Brazil to blend and roast exclusive coffee roasts for consumers in America. Additionally, the company offers apparel, accessories, and gear such as mugs, cups, glasses, and tumblers.
The mission-driven premium coffee company is a strong disruptor that strives on an innovative brand strategy that is unique as compared to big names in the coffee industry. The company’s sales are largely catalyzed by the extensive reach of popular retail stores such as 7-11, Walmart, Albertsons, and Giant. The company recently unlocked another major achievement by announcing a strategic partnership with Keurig Dr Pepper for the manufacturing and licensing of its single-serve pods which will foster growth across its current portfolio. With a patriotic mission of supporting Veterans, active-duty military, and first responders, the coffee company has a loyal consumer base which strengthens its business. As a fast-growing beverage brand, the Black Rifle Coffee Club (with 209,000 active subscribers) also serves as an accelerator.
The company’s wholesale business growth and emphasis on keeping operational expenses low have led to a strong financial performance over the recent fiscal quarter. The net revenue increased 18% year-over-year in the first quarter to $98.4 million. With the adjusted EBITDA hitting $14.1 million, the company witnessed record profitability. Analysts hold a consensus Buy rating on the stock and their 1-year median price target points to a 26.70% upside from the current stock price. Through a strong niche presence in a highly competitive coffee market and growth prospects, BRC Inc. (NYSE:BRCC) is another top coffee stock to buy. BRCC was held by 10 hedge funds at the close of Q1 2024. As of March 31, Engaged Capital is the dominant shareholder in the company with a position worth $55 million.
Overall BRCC ranks 5th on our list of the best coffee stocks to buy. You can visit 7 Best Coffee Stocks to Buy Now to see the other coffee stocks that are on hedge funds’ radar. While we acknowledge the potential of BRCC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BRCC 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.