We recently published a list of the 12 Best Grocery Store Stocks to Buy Now. In this article, we are going to take a look at where Ingles Markets, Incorporated (NASDAQ:IMKTA) stands against other best grocery store stocks to buy now.
Is Weak Economic Growth on the Horizon for the US?
CNBC reported that retail sales dropped 0.9% for January after a 0.7% growth in December. This drop was worse than the estimated 0.2% decline estimated by Dow Jones for the month. Prices fell 0.4%, excluding auto, also not in line with the consensus forecast of a 0.3% increase. The “control” sales growth dropped 0.8%. Music, sporting goods, and bookstores declined 4.6% in the month, while online outlets dropped 1.9%. Food and drinking establishments and gas stations both reported a 0.9% increase. According to a Commerce Department report, consumers significantly trimmed their spending in January, which may point towards a potential weakening in economic growth in the coming future.
Consumer spending makes up around two-thirds of all the economic activity in the United States, and the sales numbers reflect a potential weakening in growth for fiscal Q1 2025. Experts believe that a rate cut by the Fed may be as close as June. Inflation is ahead of the Federal Reserve’s 2% goal, with the consumer price index posting a 0.5% gain in January with a 3% annual inflation rate. Robert Frick, corporate economist with Navy Federal Credit Union, said and CNBC reported:
“The drop was dramatic, but several mitigating factors show there’s no cause for alarm. Some of it can be chalked up to bad weather, and some to auto sales tanking in January after an unusual surge in December due to fat dealer incentives. Especially considering December was revised up strongly, the rolling average of consumer spending remains solid.”
Signs of Stress Reported in Higher-Income US Consumers
Job concerns, inflation, and high interest rates are affecting many American consumers, including the higher-consumer group. People with incomes of $150,000 and more are considered high earners, and this group is showing signs of stress. CNBC reported that they are increasingly facing difficulty making payments on auto loans, credit cards, and mortgages. A new report by VantageScore, a national credit company, was released early to CNBC, which reported that the delinquency rate among this group of high earners is nearing a five-year high, increasing around 130% over the last two years between January 2023 and December 2024. VantageScore CEO Silvio Tavares said the following about the situation in an interview with CNBC:
“We’ve seen significant increases in services cost, like home insurance and auto insurance, and that is hitting the high-income consumer harder than most. That’s what’s driving that delinquency rate”.
Tavares further said that consumers are cautious with credit even when they have a lot of it available by simply choosing not to use it. While credit card balances grew 2.9% year-over-year in December 2024, this rise was in keeping with inflation. Consumers thus have room to breathe before reaching their tipping point. Consumer credit utilization reached 51.6% overall, dropping one percentage point and attaining its second-lowest rate in 2024. Tavares believed that consumers not using their available credit and practicing self-control is a positive sign. Their “credit cautious” outlook for the new year can be a good practice as concerns about unexpected prices and inflation stand even with last year’s solid stock market gains.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 20 grocery stocks. We then selected the top 12 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).
An aisle lined with shelves of fresh and frozen foods in a supermarket store.
Ingles Markets, Incorporated (NASDAQ:IMKTA) is a grocer in six southeastern states. It operates neighborhood shopping centers in conjunction with its supermarket operations and also owns a fluid dairy facility. Its product offerings include grocery products, produce, meat and dairy products, frozen foods, and other non-food products. The company operates around 198 supermarkets, 115 in-store pharmacies, and 108 fuel stations.
The company has solid debt management and capital discipline policies, bolstering its appeal as a long-term investment. Its debt-to-equity ratio dropped from over 200% to 67% in the past decade and with over $403 million in debt repayments, it is constructing a solid financial base. Its share buybacks have supported shareholder value, as seen in the 2021 buyback that slashed shares by 6.3% and drove the stock price from $37 to $100. Since Ingles Markets, Incorporated’s (NASDAQ:IMKTA) cash reserves are at an all-time high, it offers a high potential for further buybacks or dividend adjustments to reward shareholders.
The company ceased earnings calls in 2018 and is focused on long-term growth without considering Wall Street pressures.
Overall, IMKTA ranks 9th on our list of the best grocery store stocks to buy now. While we acknowledge the potential of IMKTA 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 IMKTA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
