Stock Market Sell-Off: 2 Monster Stocks to Buy While They Are On Sale

The recent market sell-off has created a unique opportunity for investors to snatch up some of the best growth stocks at a discount. With the increased likelihood of a 2025 recession, many investors are cautious, but there are still some monster stocks that stand out as attractive investments. Let's dive into two standout companies: Dutch Bros (BROS) and Cava Group (CAVA).

Dutch Bros: A Coffeehouse on the Rise

Dutch Bros has been a standout performer in the coffeehouse sector, and the recent market sell-off has pulled its stock 24% off its recent highs. This presents an excellent opportunity for investors to start a position at a more favorable price.

Expansion Story: Dutch Bros has a robust expansion strategy, with plans to add around 160 new locations in 2025, representing about 16% unit growth. The company ended 2024 with 982 locations, of which 670 were company-owned, and operates in just 12 states, primarily in the western U.S. This leaves significant room for expansion into new markets. The company's strategy of focusing on company-operated stores allows for better control over quality and service, which has been a key driver of its success.

Strong Same-Store Sales Growth: Dutch Bros has enjoyed solid same-store sales growth, with this metric jumping 6.9% in the latest quarter. This growth was driven by price increases and a 2.3% rise in transactions. Company-operated stores performed even better, with comparable-store sales climbing 9.5% and transactions up 5.2%.

Mobile Ordering and Loyalty Program: Dutch Bros has introduced mobile ordering capabilities in 96% of its stores, which has the potential to drive further growth. Only 8% of its orders currently come from mobile devices, indicating significant room for growth in this area. The company is also tying mobile ordering with its loyalty program, which helps to keep customers engaged and incentivize frequent visits.

Efficient Store Operations: Dutch Bros stores are relatively small, with most new builds falling between 800 square feet and 1,000 square feet, and rely on a walk-up window and multiple drive-thru lanes. This makes the cost to build out a new location relatively low, and the returns are strong.

Cava Group: Mediterranean Fast-Casual Dining

Cava Group has also been affected by the market sell-off, with its shares trading 53% off their 52-week high. This provides an attractive entry point for investors.

Strong Business Performance: Cava has shown impressive business performance, with same-restaurant sales growing 13.4% and adjusted net profit jumping from $13.3 million in 2023 to $50.2 million in 2024. The company's exceptional restaurant-level economics have translated to a stellar profit margin of 13% over the last year.

Efficient Operations: Cava's strategy focuses on using technology to streamline food preparation, making its restaurants very efficient. The company has updated its two-year, cash-on-cash returns for its restaurants from 35% to 40%, implying a quick payback return for each new location.

Expansion Plans: Cava ended 2024 with 367 restaurants in 25 states, in addition to Washington D.C., and plans to enter new markets such as south Florida and other mid-Atlantic areas in 2025. The company's goal is to have 1,000 restaurants open by 2032, indicating significant growth potential.

Unique Brand and High Margins: Cava's unique brand and high margins make it an attractive investment. The average restaurant profit margin ranges between 3% to 5%, but Cava's exceptional restaurant-level economics have translated to a stellar profit margin of 13% over the last year.



Conclusion

The recent market sell-off and economic indicators have created buying opportunities for Dutch Bros and Cava Group. Both companies have shown resilience and strong growth potential, making them attractive investments despite the increased likelihood of a 2025 recession. Their strong expansion strategies, efficient operations, and unique value propositions position them well for long-term growth. Investors looking to capitalize on the current market volatility should consider adding these monster stocks to their portfolios.