In this article, we are going to discuss the 10 best alcohol stocks to own according to hedge funds.
There is a substantial amount of evidence that suggests that any alcohol consumption, however moderate, can have negative health consequences. Even low levels of drinking can increase the risk of heart disease, high blood pressure, and even certain types of cancer. Understanding that there is no such thing as risk-free drinking, the Centers for Disease Control and Prevention defines moderate drinking as 2 drinks or less per day for men and no more than one drink per day for women. Still, despite the well-publicized health risks, more than two-thirds of adult drinkers regularly exceed those levels.
READ ALSO: 20 Largest Publicly Traded Liquor Companies in the US and 20 Best Wine Brands in the World.
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. As we mentioned in our article – 20 Countries with the Highest Alcohol Consumption per Capita in 2024 – the global alcoholic beverages market size was valued at $1.62 trillion in 2021 and is projected to reach $2 trillion by 2031, with a CAGR of 2.2% during 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.
The American Liquor Market:
The American liquor industry is overcoming economic headwinds to meet changing consumer preferences as it chips away at the dominance of beer. According to the Distilled Spirits Council of the United States, the spirits revenue market share grew from 28.7% in 2000 to 42.1% in 2022, while beer held a 41.9% market share that year. Thus, in 2022, the spirits industry surpassed beer in revenue for the first time ever. The trend continued in 2023 when the spirits market share again totaled more than 42%. The spirits supplier sales in the United States totaled $37.7 billion last year, while volumes rose 1.2% to 308.8 million 9-liter cases.
The rise to the top for spirit-makers is fueled in part by the resurgent cocktail culture, including the growing popularity of ready-to-drink concoctions, as well as strong growth in the tequila and American whiskey segments.
The Financial Impact of Alcohol in America:
As stated in our article – 20 Drunkest States in the US – booze plays an enormous role in the American economy. As of 2021, the total share of the beverage alcohol market in the U.S. represented almost $250 billion and over 3.4 billion cases sold. Beer/FMB/hard seltzer accounted for 43.5% of value share, followed closely by spirits at 39.5%, and wine at a 17% share.
The U.S. alcohol beverage industry is responsible for sustaining more than 4 million jobs and generating almost $70 billion in annual tax revenue. And that doesn’t even scratch the surface of the economic benefits the industry provides to late-night restaurants and pizza shops. According to the Beer Institute, the beer industry alone supports 1.75 million jobs. From the farmers harvesting the barley in your beer, to the beer truck driver, to your local bartender, every aspect of your drink exists because of someone in the alcohol industry working hard behind the scenes.
However, there’s obviously also a downside to the heavy alcohol consumption in America. According to the CDC, excessive drinking costs the country around $249 billion annually, when combining healthcare expenditures, lost earnings and productivity, criminal justice implications, vehicle crashes, property damage, and more. The federal government picks up roughly $100 billion of the tab, largely through Medicare and Medicaid payments. Several evidence-based strategies can help reduce excessive drinking, including increasing alcohol excise taxes, limiting alcohol outlet density, and commercial host liability.
With that said, here are the Top Liquor Socks to Invest in According to Hedge Funds.
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Methodology:
To collect data for this article, we scanned Insider Monkey’s database of 912 hedge funds and picked the top 10 companies operating in the alcohol sector with the highest number of hedge fund investors as of Q2, 2024. When two companies had the same number of hedge funds investing in them, we ranked them by the revenue of their last financial year instead. Following are the Alcohol Stocks Held by the Most Hedge Funds.
At Insider Monkey we are obsessed with 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).
10. Tilray Brands, Inc. (NASDAQ:TLRY)
Number of Hedge Fund Holders: 15
Tilray Brands, Inc. (NASDAQ:TLRY) ranks tenth in our list of the Best Alcohol Stocks. The company has a highly diversified global portfolio – operating in more than 20 countries across North America, Europe, Australia, and Latin America, with 5 businesses in medical adult-use cannabis, beverages, spirits, wellness products, and 44 consumer-connected lifestyle brands.
The craft beer and cannabis company that was among the first to be licensed for medical marijuana in Canada announced last year that it had agreed to acquire eight beer and beverage brands from Anheuser-Busch InBev for an undisclosed amount. As a result, Tilray is now the 5th largest craft beer business in the U.S. with a 4.5% market share. To further strengthen its craft beer portfolio, the New York-based company announced this month that it had agreed to acquire another four craft beer brands from Molson Coors – Hop Valley Brewing Company, Terrapin Beer Co., Revolver Brewing, and Atwater Brewery. The company has also diversified into spirits and earlier this year, its Breckenridge Distillery celebrated the wins of World’s Best Finished Bourbon, America’s Best Finished Bourbon, and Icons of Whisky Campaign Innovator of the Year: Highly Commended at the 2024 World Whiskies Awards.
For its Q4 ended May 2024, Tilray Brands, Inc. (NASDAQ:TLRY) reported revenue of $229.9 million, up 24.8% over the same period last year and even beating analysts’ estimates by almost 1.9%. The net revenue for the entire fiscal year was also reported at around $789 million, marking a 26% increase from the previous year. The company also managed to strengthen its balance sheet by significantly reducing its net convertible debt by approximately $300 million.
The core business of Tilray Brands, Inc. (NASDAQ:TLRY) is cannabis and it boasts the number one market share in Canada, as well as the leading cannabis market share by revenue in Germany. The company has lately been very active in acquiring other industry players to expand its presence and the strategy seems to be paying off. For example, its acquisition of Redecan in June 2023 has helped it gain a strong footing in categories like pre-rolls, oils, and capsules. As a result, Tilray is now the No. 1 player in the straight-edge pre-rolled category with a 46% market share, as well as a top player in the oils and capsules category combined with a 21.5% market share in the adult-use business in Canada. Another major development that could significantly benefit Tilray is the easing of federal restrictions on cannabis in the U.S.
9. MGP Ingredients, Inc. (NASDAQ:MGPI)
Number of Hedge Fund Holders: 18
If you’re a whisky 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.
MGPI is a pure-play spirits company and has benefited greatly as spirits continue to dominate the American market. The company has boasted a massive increase in revenue over the last few years, from $362.75 million in 2019 to over $836.5 million in 2023 – an increase of over 130%.
For the second quarter of 2024, MGP’s consolidated sales decreased 9% compared to the prior year period to $190.8 million. This is primarily attributed to the closure of its Atchison distillery in December 2023 due to headwinds facing its grain-neutral spirits. However, quarterly gross margins increased to 43.6%, which is an all-time high for the company. The year-to-date cash flow from operations was also recorded at $29.6 million at the end of Q2, up from $20.2 million in the same period last year, mainly due to favorable working capital, including lower barrel put away.
Ariel Investments, an investment management company, stated the following about MGP Ingredients, Inc. (NASDAQ:MGPI) in its Q1 2024 investor letter:
“Also in the quarter, we initiated a new position in leading spirits manufacturer, MGP Ingredients, Inc. (NASDAQ:MGPI). After years of successfully developing products for third parties, MGPI entered the branded spirits business. Leveraging its scale and know-how, MGPI is turning existing relationships into growth stories by acquiring and scaling niche premium brands. A recent strategic decision to shut down a distillery in Kansas and concerns around peak whiskey demand amidst a challenging macro environment have placed pressure on the stock. However, we believe the core business is stable and expect branded spirit acquisitions to drive top-line growth and expand margins longer-term.”
8. Ambev S.A. (NYSE:ABEV)
Number of Hedge Fund Holders: 18
Ambev S.A. (NYSE:ABEV), formally Companhia de Bebidas das Américas, is a Brazilian brewing company that has now merged with Anheuser-Busch InBev. It offers beer under several brand names such as Skol, Brahma, Antarctica, etc. It is the largest beverage firm in Brazil with a well-established presence in the country and also enjoys a footprint in other Latin American nations and non-alcoholic goods.
The São Paulo-based company reported a revenue of around $3.6 billion in Q2 of 2024, up 6.5% from the same quarter last year, thanks to a growth in volume in Brazil and CAC. One of its core premium brands, Spaten, is one of the fastest-growing beers in the Brazilian market, with Corona and Budweiser also gaining significant ground.
Ambev S.A. (NYSE:ABEV) boasts a 60% share in the Brazilian beer market and has almost doubled its revenue in the local currency in the last ten years, from around R$37 billion to almost R$80 billion, despite the intense competition from the likes of Heineken N.V. However, its over-reliance on the Brazilian market and beer losing its share to spirits internationally could also prove to be risky.
The shares of Ambev S.A. (NYSE:ABEV) were held by 18 hedge funds at the end of Q2 2024 in the Insider Monkey database, 4 more than the previous quarter. The largest stake of over 310 million shares was held by First Eagle Investment Management, valued at around $635.8 million.
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