We recently compiled a list of the 8 Stocks on Jim Cramer's Radar.In this article, we are going to take a look at where Brown-Forman Corporation (NYSE:BF-B) stands against the other stocks on Jim Cramer's radar.
Jim Cramer, host of Mad Money, recently discussed some of the significant challenges the alcohol industry is facing. He pointed out that as the end of January approaches, the wine and spirits industry might be hoping for a quick resolution to what he described as a "disaster of a month," caused by "Dry January."
He questioned whether the slowdown in alcohol consumption during this month would continue into February, admitting that he wasn't sure, but expressing concern that the industry could be facing deeper problems. One of Cramer's major concerns was that most alcohol companies have not acknowledged the full extent of the difficulties they may be facing.
“They say we're experiencing a post-COVID normalization because of excessive alcohol consumption during the pandemic. That's why I say they're holding their breath to see if the mocktails and the zero-alcohol beers quickly disappear by Saturday when January comes to an end. Look, I think these companies are about to have a rude awakening when dry January turns into drier-than-expected February and then we might even spiral from there.”
Cramer highlighted several key factors contributing to the decline in alcohol consumption. He first noted the rise of cannabis, which has become much more affordable in many states, offering a legal high without the risk of a hangover. He pointed out that we are no longer in the era of Smokey and the Bandit and suggested that cannabis could be stealing market share from alcohol.
Secondly, Cramer referenced a recent warning from the U.S. Surgeon General about the links between alcohol consumption and the increased risk of various cancers, including breast and liver cancer. He emphasized that there is no safe level of alcohol consumption when it comes to cancer prevention, which he said could have a significant impact on health-conscious consumers. He added:
“Third, young people just don't like to drink as much as they used to. Some profess health worries. Others know that the liquor companies jacked up prices during the pandemic and now refuse to take them down. Fourth, ubiquitous GLP-1 weight loss drugs can stop your craving for alcohol in its tracks.”
He mentioned that studies indicate heavy drinkers tend to reduce their alcohol consumption when they start using these medications. Taken together, Cramer argued that these trends represent a significant challenge for the alcohol industry.
Despite these challenges, Cramer suggested that there is still hope for the alcohol business, but it will require innovation. He emphasized the importance of creating new and exciting drink options that stand out in a crowded market. Value pricing, he said, will also be crucial. He stressed that the days of endless price hikes without any pushback or creativity are over. Cramer expressed confidence that social drinking would remain part of people's lives, but he warned that alcohol could end up in the same category as tobacco if companies do not adapt.
“Let's drop the normalization wrap, please. This is not normal. The liquor companies need to be clever, thoughtful, and exciting, or they should just go find another business.”
Our Methodology
For this article, we compiled a list of 8 stocks that were discussed by Jim Cramer during the episode of Mad Money on January 29. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the third quarter of 2024, which was taken from Insider Monkey’s database of 900 hedge funds.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is Diageo plc (DEO) the Best Brewery Stock to Buy According to Hedge Funds?
A close-up of bottles of whisky and other alcoholic beverages from a winery.
“Of course, LVMH is not alone. The numbers from Brown-Forman, which owns Jack Daniels, Woodford Reserve, Old Forester, Herradura, and the one that we call el Jimador are abysmal.”
Brown-Forman (NYSE:BF-B) is involved in the production, marketing, and sale of a wide range of alcoholic beverages, including wines, spirits, and ready-to-drink products, and also offers contract bottling services and bulk whiskey and wine sales. It is interesting to note that back in December 2024, when discussing the company, Cramer said:
“I’m too concerned about the long-term challenges to pound the table on any of these names, especially Brown-Forman or Diageo… But I’m also open to the idea that we’ve simply gotten too negative on the group.”
Overall BF-B ranks 2nd on our list of the stocks on Jim Cramer's radar. While we acknowledge the potential of BF-B 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 BF-B but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
