In this article, we will look at the 5 best liquor stocks to buy now. If you want to read our discussion on the trends in the alcoholic beverage industry and its future outlook, you can go directly to 12 Best Liquor Stocks to Buy Now.
5. Diageo plc (NYSE:DEO)
Number of Hedge Fund Holders: 21
Diageo plc (NYSE:DEO) is a London, England-based manufacturer of alcoholic beverages with 200 brands under its coverage and a presence in over 180 countries.
For the year ended June 30, 2022, Diageo plc (NYSE:DEO) observed a 21.4% annual increase in net sales to $18.78 billion. Meanwhile, the net income grew by 18.2% to $5.34 billion. The maker of Johnnie Walker saw a decline of 9% in net sales during the peak of the pandemic in FY20. However, the company bounced back in FY21 and reported an increase in net sales of over 8%. Diageo plc (NYSE:DEO) is a beneficiary of the premiumization movement as consumers are moving towards brands with higher price points. This was evident by the fact that the super-premium segment experienced an increase of over 31% YoY during FY22.
Here’s what ClearBridge Investments said about Diageo plc (NYSE:DEO) in its Q2 2022 investor letter:
“Diageo is a leading global distiller and brewer which addresses the large ($500 billion-plus) and fragmented market for spirits. With its portfolio of premium products, we see Diageo as a steady compounder poised for sustained, above industry growth. The company’s margins remain below pre-COVID levels in a number of geographies and should continue to recover as channels reopen, though we also see opportunities for consistent margin expansion beyond this period of rebound. The spirits category is not immune to weaker consumer spending nor inflation; however the majority of Diageo’s profits are from the U.S. market, which has historically been more resilient. Additionally, the company has a number of margin levers to help combat rising input costs.”
4. The Boston Beer Company, Inc. (NYSE:SAM)
Number of Hedge Fund Holders: 22
The Boston Beer Company, Inc. (NYSE:SAM) is a fast-growing beer brewing company with a headcount of over 2,500 employees.
In Q2 2022 results, Chairman and Founder Jim Koch highlighted that The Boston Beer Company, Inc. (NYSE:SAM) has a strong balance sheet, the ability to grow brands, and innovation capabilities to sustain long-term growth. Following the quarterly results, Kaumil Gajrawala at Credit Suisse gave The Boston Beer Company, Inc. (NYSE:SAM) stock an Outperform rating with a target price of $385 on July 22. The analyst highlighted that the company is recovering from the weakness of the hard seltzer market and boosting efforts in other segments.
Over 50% of The Boston Beer Company, Inc.’s (NYSE:SAM) outstanding shares are owned by institutional investors. Analysts believe this is indicative of the company’s credibility and the investors’ belief in the long-term outperformance of the stock.
Here’s what Artisan Partners said about The Boston Beer Company, Inc. (NYSE:SAM) in its Q3 2021 investor letter:
“We ended our campaigns in Boston Beer Company. Boston Beer Company sells a focused portfolio of alcoholic beverage brands. In recent years, the company has emerged as one of the leaders in the hard seltzer category, which has grown over 150% in each of the past three years (2018-2020). Boston Beer’s Truly brand, the second-largest seller of hard seltzer, has benefited from this growth and was core to our investment thesis. However, the hard seltzer category’s growth has recently slowed to single digits, falling short of high investor expectations and pressuring Boston Beer’s earnings upside. Truly’s growth was core to our investment thesis, and a recovery is uncertain; thus, we ended our investment campaign.”
3. Brown-Forman Corporation (NYSE:BF-B)
Number of Hedge Fund Holders: 33
Brown-Forman Corporation (NYSE:BF-B) is a Louisville, Kentucky-based spirits and wine company.
Brown-Forman Corporation (NYSE:BF-B) has a bright future outlook due to its strong growth strategies. The maker of Jack Daniel’s has partnered with the Coca-Cola Company (NYSE:KO) in expanding its footprint in the ready-to-drink alcohol market. Both corporations will join efforts to launch the “Jack & Coke” canned cocktail later this year. It is a widely known bar cocktail that will come in regular and zero-sugar versions. Mexico will be the debut market for the product. The drink would have an alcohol by volume (ABV) of 5%.
Furthermore, Brown-Forman Corporation (NYSE:BF-B) has highlighted India as an emerging market and is focused on expanding its footprint in tier two cities by investing actively in brand building.
Lindsell Train presented its insights on Brown-Forman Corporation (NYSE:BF-B) in its Q4 2021 investor letter:
“Such growth indicates that it’s not mass market tequila shots driving the boom but rather exquisitely crafted Palomas and complex fine sipping tequilas served over ice or even neat. The global rise of interest in cocktails – itself another indicator of consumer tastes turning towards quality over quantity – has been kind to tequila, with the 2021 Bacardi Global Brand Ambassador Survey placing it as the top trending spirit for 62% of global bartenders (rising to 76% in the US) and tequila-based cocktails now ranking 4 of 30 in popularity. We recognise that trends and “booms” have long been a feature of the spirits market, but arguably the combination of demographic behavioural changes and the increased emphasis on truly differentiated flavours as well as heritage and provenance might make shifts like this more durable than in previous years. So we were impressed with our Global portfolio holding Brown-Forman’s 20% growth in tequila volumes in 2021; and despite raised eyebrows at the 2017 Casamigos purchase price of $1bn, we’re pleased that Diageo owns this superpremium tequila and has managed to grow case sales from just 170,000 in 2017 to 1m in 2020. And even more importantly, I did happen to notice in the course of my, er, extensive research that Casamigos has now been immortalised by Claridge’s in a new cocktail named – what else? – “The George”.”
Overall, 33 funds held a stake in Brown-Forman Corporation (NYSE:BF-B) as of Q1 2022.
2. Molson Coors Beverage Company (NYSE:TAP)
Number of Hedge Fund Holders: 36
Molson Coors Beverage Company (NYSE:TAP) is a Chicago, Illinois-based developer, producer, and distributor of beer and other beverage products.
During Q2 2022, Molson Coors Beverage Company (NYSE:TAP) was able to outperform the broader industry in the Canada, UK, and US region. The company observed sales growth in the premium and the cheaper beer category. Furthermore, Molson Coors Beverage Company (NYSE:TAP) reported that its sales had reached 93% of the pre-pandemic levels due to the company’s “above-premium” brands. Molson Coors Beverage Company (NYSE:TAP) believes that it has the right mix of brands under its portfolio to compete and win across multiple segments in the future.
Of the 912 hedge funds being tracked by Insider Monkey, Molson Coors Beverage Company (NYSE:TAP) was held by 36 funds as of Q1 2022.
1. Constellation Brands, Inc. (NYSE:STZ)
Number of Hedge Fund Holders: 41
Constellation Brands, Inc. (NYSE:STZ) is a New York-based producer of beer, wine, and spirits.
On August 2, Andrew Strelzik at BMO Capital initiated coverage on Constellation Brands, Inc. (NYSE:STZ) with an Outperform rating and a target price of $290. The target price offers a potential upside of nearly 19% from the closing price as of August 15. The analyst believes that Constellation Brands, Inc. (NYSE:STZ) offers investors an attractive risk and reward profile and a multi-year growth story.
Furthermore, Constellation Brands, Inc. (NYSE:STZ) stock is trading at a discount compared to its competitors. Analysts think there is a potential upside to the company’s beer revenue forecast for FY23, and earnings growth is expected to continue the upward momentum in FY24 as well. Experts believe the company is well-positioned across the beer, wine, and spirits segments.
ClearBridge Investments shared its bullish outlook on Constellation Brands, Inc. (NYSE:STZ) in its Q2 2022 investor letter. Here’s what the firm said:
”Our investment philosophy is to lean into growth, owning companies that control their own destinies, are taking market and mind share and are levered to secular tailwinds such as elevating efficiency and implementing data-driven decisions. At the same time, we have been tactically pivoting the portfolio to favor companies with less risk to near-term earnings and revenue numbers. Monster Beverage (MNST) and Constellation Brands, Inc. (NYSE:STZ), two beverage makers we added at advantageous prices in 2021, are examples of steady compounders that have held up well through the equity downturn.”
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