We recently published a list of the 10 Cheap Food Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where The Kroger Co. (NYSE:KR) stands against the other cheap food stocks to buy according to hedge funds.
Consumer Confidence Shows Major Drop
CNBC reported that The Conference Board’s Consumer Confidence Index dropped to 98.3 for February, reflecting a slip of nearly 7% and below the Dow Jones forecast of 102.3. This marked the largest monthly drop the market has seen since August 2021. In addition, The Expectations Index dropped to a 72.9 reading, reflecting a decrease of 9.3 points. The measure has tumbled below the level consistent with recession for the first time since June 2024. These trends show that consumers are becoming increasingly pessimistic about the country’s economic outlook, and this pessimism reached new heights in February due to skepticism surrounding rising inflation and a slowing economy, according to the Conference Board.
Furthermore, the drop in consumer confidence is materializing amid President Trump’s threats of additional tariffs against the US’s trading partners. The US President recently declared that his previously announced tariffs against Mexico and Canada will move forward in March after a postponement of their implementation in February.
CNBC reported that Stephanie Guichard, the board’s senior economist for global indicators, said the following about the emerging situation:
“Views of current labor market conditions weakened. Consumers became pessimistic about future business conditions and less optimistic about future income. Pessimism about future employment prospects worsened and reached a ten-month high.”
What Could Tariffs and Potentially Rising Inflation Mean for the Food Industry?
Economists and experts opine that the situation is unpredictable and worrisome. Trump’s tariffs may ignite another bubbling of inflation in a scenario where the Federal Reserve is weighing the odds of whether to slash interest rates further or hold steady as experts and policymakers chalk out the effects of the President’s aggressive trade and fiscal policies, as reported by CNBC.
Consumers are reflecting the worries of economists and experts, as the 12-month inflation expectations rose to 6%, up from 5.2% in the last month and considerably higher than the Fed’s steady goal of 2%. CNBC reported that Guichard opined:
“This increase likely reflected a mix of factors, including sticky inflation but also the recent jump in prices of key household staples like eggs and the expected impact of tariffs. There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019. Most notably, comments on the current administration and its policies dominated the responses.”
Treasury Secretary Scott Bessent rang caution bells regarding “sticky” inflation and the potential for slow growth. He attributed the cause to former President Biden’s administration, saying that he fostered an economy too dependent on government spending. He said the government’s plan now is to develop a more diverse economy through deregulation, tax cuts, and tariffs. However, such a scenario is likely to have adverse effects on the food industry. Economists believe that such aggressive policies may drive the cost of food, apparel, toys, and appliances. CNBC reported that Bessent said:
“The previous administration’s over-reliance on excessive government spending and overbearing regulation left us with an economy that may have exhibited some reasonable metrics but ultimately was brittle underneath, and heading for an unstable equilibrium.”
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of food stocks with a forward P/E ratio of less than 15. We then selected the top 10 most popular stocks among elite hedge funds as of Q4 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.
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 the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is The Kroger Co. (KR) Undervalued Defensive Stock for 2025?
A customer buying an item at a checkout counter in a grocery store.
The Kroger Co. (NYSE:KR) is a food and drug retailer that operates supermarkets, fulfillment centers, and multi-department stores, offering a range of food items. Its brand portfolio includes Smart Way, Big K, Heritage Farm, Simple Truth Organic, and Simple Truth. The company operates approximately 2,722 supermarkets, 2,257 pharmacies, and 1,665 fuel centers in 35 US states and the District of Columbia.
The Kroger Co. (NYSE:KR) has various plans to improve its standing. It is focusing on enhancing customer loyalty, expanding its digital footprint, and, engaging in competitive pricing to drive sales and strengthen profit margins. The company’s performance reflects that it can remain profitable under various market circumstances.
The company has an established digital presence that it has attained by investing in automation, creating distribution channels in delivery and pickup, building out its own properties, and enhancing personalization over nearly a decade. The Kroger Co. (NYSE:KR) is benefiting from this presence, as its digital sales increased by 11% in the fiscal Q3 2024. Delivery sales were up by 18%, primarily driven by customer fulfillment centers. Overall, the company has raised its payouts for 18 consecutive years and supports a dividend yield of 1.96% as of February 10.
Overall, KR ranks 3rd on our list of the cheap food stocks to buy according to hedge funds. While we acknowledge the potential of KR 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 time frame. If you are looking for an AI stock that is more promising than KR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
