In this article, we are going to discuss the 12 best alcohol stocks to own according to hedge funds. You can skip our detailed analysis of the global alcohol industry, the rise of RTDs, and the recent shifts in the global alcohol market, and go directly to 5 Best Alcohol Stocks to Own According to Hedge Funds.
The Global Alcohol Industry:
In 2019, the global alcohol consumption, measured in liters of pure alcohol per person of 15 years of age or older, was 5.5 liters, which is a 4.7% relative decrease from 5.7 liters in 2010. According to Allied Market Research, the global alcoholic beverages market size was valued at $1.62 trillion in 2021, and the market is projected to reach $2 trillion by 2031, with a CAGR of 2.2% in the forecast period.
The market is likely to be driven by the increasing global young-adult demographic, coupled with high disposable income and consumer demand for premium/super-premium products. Globally, beer drives the market for alcoholic beverages. Regionally, North America and Asia-Pacific are expected to dominate the market during the forecast period.
When Alcohol is a Lucrative Investment Asset
Rare whiskeys are incredible as investment vehicles. The Rare Whisky 101 Apex 1000 Index tracks whiskeys that are highly sought after for collection. It has gained 415% since 2013, against 178% gains of S&P500 for the same period. The RW Japanese 100 Index, on the other hand, includes 100 collector's bottles from Japan, and since 2014, the index has seen gains of 514.50%. The index includes bottles like Ichiro's Malt 'Card' Ace of Spades, Ace of Diamonds and King of Hearts, among others.
The Rise of RTDs:
Ready-to-drink beverages continue to make headlines as the fastest-growing alcohol beverage category. While malt-based RTDs still retain a 91% share by volume in the American RTD market, spirit-based RTDs grew by 51% in 2021, approximately double the growth of the wine-and malt-based categories. As we mentioned in our article – 25 Most Popular Spirits in the World– the spirits-based RTDs are expected to grow at a CAGR of 33% in volume in the U.S. by 2025.
As consumers continue to look for ‘healthier’ alcohol options, spirit RTDs are responding with spirit-based seltzers with natural flavors and fewer calories. Spirit RTDs like Owl’s Brew’s Tea-based Seltzers claim to be alcoholic drinks that are good for health, benefiting from the ‘health halo’ created by ingredients like vitamins, anti-oxidants, and probiotics.
Recent Shifts in the Global Alcohol Market:
From Japan to the United States, global drinking habits have shifted dramatically in recent years. While it may look like the alcohol industry is set to achieve a multi-trillion dollar mark in the coming decades, recent changes in consumer behavior suggest that the market, as we know it today, may be in danger of running dry.
As we mentioned in our article – Gen Z’s 25 Favorite Brands of 2023 – a growing share of the health-conscious Gen Zers are turning away from alcohol. Gen Z drink 20% less per capita than millennials – who, in turn, drink less than Baby Boomers or Gen Xers did at the same age. This has led to the rise of companies like the Athletic Brewing Co., with the non-alcoholic beer maker now becoming one of the Largest Craft Breweries in the US by Volume.
This has also caught the attention of Anheuser-Busch InBev SA/NV (NYSE:BUD) and the industry giant is now investing $34 million in upgrading some of its Belgian breweries, which will help expand its non-alcoholic beer portfolio. The company has also set itself an ambitious target of having low-and-no alcohol beers account for 20% of its overall sales by 2025.
According to Global Market Insights, the global non-alcoholic beer market was valued at $22 billion in 2022, and is expected to reach $40 billion by 2032, with a CAGR of 5.5% in the forecast period.
With that said, here are the Best Alcohol Stocks According to Hedge Funds.
12 Best Alcohol Stocks to Own According to Hedge Funds
Anna_Pustynnikova/Shutterstock.com
Methodology:
To collect data for this article, we scanned Insider Monkey’s database of 910 hedge funds and picked the top 12 companies that operate in the alcohol industry with the highest number of hedge fund investors. Following are the Best Alcohol Stocks to Own According to Hedge Funds:
Compañía Cervecerías Unidas S.A. (NYSE:CCU) is a beverage company that operates in Chile, Peru, Argentina, Bolivia, Colombia, Paraguay, and Uruguay. The company is one of the biggest brewers in its home country of Chile. The brewing company boasted a revenue of $574.24 million in Q2 2023, with a net income of $118.17 million. Revenue for Q3 is expected to be around $839.9 million.
Shares of Compañía Cervecerías Unidas S.A. (NYSE:CCU) were held by 6 hedge funds at the end of Q2 in the Insider Monkey database, with First Eagle Investment Management holding the largest stake of over 14.9 million shares, valued at $241.97 million.
Ambev S.A. (NYSE:ABEV), formally Companhia de Bebidas das Américas, is a Brazilian brewing company now merged into Anheuser-Busch InBev. On the 10th of July 2023, BofA upgraded Ambev to 'Buy' from 'Neutral' with a price target of $3.59, up from $3.37, as the firm rolls over its valuation model to mid-2024. BofA is constructive on margin performance in the next 18 months, driven by lower commodity costs and consistent price/mix, and estimates that 2024 EBITDA margin will be the highest since 2019.
Jean Jereissati, the CEO of Ambev S.A. (NYSE:ABEV), said in the Q2 Earnings Call Transcript:
“Although net income declined, given last year’s one-off tax credit, cash flow from operating activities increased BRL1.2 billion. So we end H1 having delivered over 23% net revenue growth, 37% EBITDA growth and 310 basis points of EBITDA margin expansion and well positioned for H2.”
Shares of Ambev S.A. (NYSE:ABEV) were held by 14 hedge funds at the end of Q2 in the Insider Monkey database, with First Eagle Investment Management holding the largest stake of over 311.64 million shares, valued at $991.02 million.
Tilray Brands, Inc. (NASDAQ:TLRY) – a craft beer and cannabis company that was among the first to be licensed for medical cannabis in Canada – announced last month that it has agreed to acquire eight beer and beverage brands from Anheuser-Busch InBev for an undisclosed amount.
The deal includes the Shock Top, Blue Point, 10 Barrel, Breckenridge, Redhook, Widmer Brothers, Square Mile Cider, and HiBall Energy brands. Upon satisfaction of customary closing conditions, Tilray Brands, Inc. (NASDAQ:TLRY) will become the fifth-largest craft brewer in the U.S. with a 5% market share.
Berrin Noorata, the chief corporate affairs office at Tilray, said the following in the company’s Q4 Earnings Call Transcript:
“Tilray reported record financial results and delivered on projections of positive adjusted free cash flow and EBITDA guidance with Q4 net revenue of $184 million, and 93% growth in positive adjusted EBITDA of $22 million. Our total revenue for the year ended May 31, 2023 on a constant-currency basis rose 6% to $668 million in the prior year. Adjusted gross profit grew 11% to $206 million and adjusted gross margin improved to 33% from 30% in the prior year. We generated $61 million in adjusted EBITDA, 28% or $13 million higher than last year and within our annual guided range. On top of these results, we have maintained a strong foundation with almost $500 million in cash and marketable securities today.”
If you’re a whiskey lover, you’ve almost certainly tried the offerings of MGP Ingredients, Inc. (NASDAQ:MGPI), knowingly or not. This Indiana distillery has fueled the modern American whiskey boom by supplying distillers like High West, Smooth Ambler, WhistlePig, Angel’s Envy, Bulleit, and many others.
The company has boasted a massive increase in revenue over the last few years. In 2019, MGP Ingredients, Inc. (NASDAQ:MGPI) declared a revenue of $362.75 million, while by 2022, the company’s revenue had jumped up to $782.36 million – an increase of over 115%. The company reported a net income of $32.13 million in Q2 of 2023, up 25.69% from the same quarter of the previous year. MGP Ingredients, Inc. (NASDAQ:MGPI) also announced in June that it had acquired Penelope Bourbon in a $215.8 million deal, including incentives.
SouthernSun SMID Cap Strategy initiated a position in MGP in April this year. The investment management firm made the following comments about the Kansas-based company in its investment letter on August 2nd 2023:
“In June of 2023, MGPI announced the acquisition of Penelope Bourbon, adding a popular, growing bourbon brand to the portfolio. This transaction is the first tangible example of how we believe management will leverage its national distribution platform and existing distillation capacity to bring other brands into the fold. We expect acquisitions like this one to be a key element of the future value creation opportunity.”
MGP Ingredients, Inc. (NASDAQ:MGPI) is one of the best whiskey stocks to own according to hedge funds.
Anheuser-Busch InBev Sa/NV (NYSE:BUD) is the Largest Beer Producer by Volume in the World. The company had a global production volume of 595 million hectoliters, or over 25% of the global beer production in 2022. It also boasted a revenue of $57.7 billion in 2022 and a net income of almost $6 billion.
The beer behemoth has been facing some headwinds in the American market after the recent controversy regarding its best-selling brand Bud Light, which resulted in the iconic brand losing its crown as the Top-Selling Beer in America after nearly two decades.
As we mentioned in our article – Top 20 Wine Producing Countries in the World– Anheuser-Busch InBev SA/NV (NYSE:BUD) shares haven’t gone anywhere in recent years, and it lost around 40% of its value over the last 5 years. It is a highly leveraged company and the rising interest rates aren’t helping the stock either. Nevertheless, billionaire Bill Gates’ portfolio managers decided to initiate a $96 million position in the firm during the second quarter.
Broyhill Asset Management said the following about Anheuser-Busch InBev SA/NV (NYSE:BUD) in its second quarter 2023 investor letter:
“The largest detractors to performance over the quarter were First Horizon Corp (FHN), Anheuser-Busch InBev SA/NV (NYSE:BUD), and Bayer (BAYRY). Problems at Anheuser Busch InBev began on April 1 with Dylan Mulvaney’s social media post, which ignited a fiery backlash amongst Bud Light customers across ‘Merica. With volumes down sharply, and competitors gaining share at BUD’s expense, operational deleveraging is set to weigh heavily on US margins amid peak demand pressure in the second quarter. Despite severe US headwinds (second-quarter operating profit maybe half of last year’s levels), we still expect BUD to grow consolidated operating profit at a mid-single-digit rate for the full year. With current issues well understood and investor sentiment in the gutters, we see significant upside in a stock, which is approaching a double-digit FCF yield. With FX headwinds and rising input costs reversing course, increasing margins are likely to drive positive surprises into FY24 as continued deleveraging accrues more value to shareholders.”
Anheuser-Busch InBev Sa/NV (NYSE:BUD) ranks among the top 10 alcohol stocks to own in 2023 according to hedge funds.
Based in California, The Duckhorn Portfolio, Inc. (NYSE:NAPA) makes wines and calls itself a manufacturing company, agricultural company, and marketing company all rolled into one.
With a portfolio of 10 high-quality brands, The Duckhorn Portfolio, Inc. (NYSE:NAPA) is a ‘one-stop luxury wine shop’ and the largest pure-play luxury wine company in the U.S. The company announced gross profit of $50.5 million in its Q3, 2023 Earnings Call Transcript, an increase of $6.5 million or 14.9% compared to the same period in the prior year.
On the 5th of September 2023, BMO Capital initiated coverage of Duckhorn Portfolio with a 'Market Perform' rating and a $14 price target. The analyst believes Duckhorn is favorably positioned for long-term growth, but expects share upside to be limited in the medium-term by consumer spending concerns.
The firm also sees risk of potential incremental margin headwinds. The stock will remain pressured until visibility improves given the historical precedence of wine category to macro sensitivity, the analyst tells investors in a research note
Shares of The Duckhorn Portfolio, Inc. (NYSE:NAPA) were held by 20 out of 910 hedge funds in the Insider Monkey database at the end of Q2 2023, with Select Equity Group holding the largest stake of over 6.4 million shares, valued at $83.12 million.
The Duckhorn Portfolio, Inc. (NYSE:NAPA) ranks 7th in our list of best alcohol stocks to own according to hedge funds.
The Boston Beer Company, Inc. (NYSE:SAM) is one of the largest American-owned brewing companies, best known for its line of all-malt beers under the brand name Samuel Adams.
The company’s adjusted EPS of $4.72 in second-quarter 2023 increased 9.5% from the same quarter of 2022. Earnings also beat the Zacks Consensus Estimate of $3.45. This mainly resulted from higher gross margins and operating income. Net revenues declined 2.1% YoY to $603.3 million, but beat the Zacks Consensus Estimate of $599 million.
The brewing company’s shipment volume declined 4.5% YoY to 2.3 million barrels in Q2 of 2023, whereas depletions fell 3%. The decline in shipment and depletion resulted from the soft performances of the Truly Hard Seltzer, Angry Orchard, Samuel Adams and Hard Mountain Dew. These were partly negated by growth in the Twisted Tea and Dogfish Head brands.
Longleaf Partners Small-Cap Fund made the following comment about The Boston Beer Company, Inc. (NYSE:SAM) in its Q2 2023 investor letter:
“In the second quarter, we initiated three new positions, added to The Boston Beer Company, Inc. (NYSE:SAM). Founded in 1984 by Jim Koch, Boston Beer today includes original beer brand Samuel Adams, Twisted Tea (which has become the largest part of the value), regional craft beers like Dogfish Head, Angry Orchard cider and Truly Seltzer, where it is the number two player in its category. Boston Beer’s share price soared to over $1,200 per share amid a great ‘seltzer boom’ in 2020, which ultimately proved to be a fad, providing us an opportunity to invest in this great business that has compounded over time at a double-digit compound annual growth rate (CAGR).”
The Boston Beer Company, Inc. (NYSE:SAM) is a good stock to own according to hedge funds.
