In this piece, we will take a look at the ten best wine stocks to invest in 2022.
For the everyday investor, the recent economic turmoil ushered in due to the Russian invasion of Ukraine and coronavirus monetary stimulus packages is a double edged sword. While the cost of living is touching record levels, stock markets are jittery as the Federal Reserve Bank of the United States takes an aggressive approach to tackling inflation by relentlessly increasing interest rates and as a result, increasing the cost of borrowing for consumers.
However, even as the middle class decides between investing or saving, the world’s wealthiest are increasing their consumption. This has benefited high end industries, with the Wall Street Journal reporting that luxury goods sellers are increasing their marketing budgets as other companies falter during a time of historic economic crisis. It reports that St. Michelle Wine Estates Ltd., a Washington based winemaker, increased its marketing budget by 15% this year, and went on to quote the company’s chief executive officer as sharing that the sales of wines above the $15 price mark are growing.
The global wine market itself is quite sizeable, with several research reports placing its value at hundreds of billions of dollars. For instance, Vantage Research estimated earlier this year that the global wine market was worth $418 billion in 2021, and between then and 2028, it will grow at a compounded annual growth rate (CAGR) of 6.2% to touch $600 billion at the end of the forecast period. The research firm believes that the industry will benefit from the growing popularity of e-commerce, with some of the largest wine markets in the world, such as those in the U.S., U.K., Spain, and other European countries, already making strong progress to order their alcohol online.
For our piece today, we’ve taken a look at some of the top wine stocks in the industry, and some of the well known firms in our list are The Duckhorn Portfolio, Inc. (NYSE:NAPA), Diageo plc (NYSE:DEO), and Constellation Brands, Inc. (NYSE:STZ).
Public Domain/Pixabay
Our Methodology
We took a broad view of the wine industry and studied factors such as dominant sectors and well performing markets to sift out the firms that are taking advantage of these beneficial situations. The companies themselves were then analyzed through their financial performance, market share, and other metrics.
Best Wine Stocks to Invest In 2022
10. MGP Ingredients Inc (NASDAQ:MGPI)
Kansas-based MGP Ingredients Inc (NASDAQ:MGPI) makes distilled spirits, wine, branded spirits, and food ingredients.
Last month, Wells Fargo said in a note that MGP Ingredients Inc (NASDAQ:MGPI) shares offer “reasonable” valuation. The firm likes MGP’s domestic and secular tailwinds as well as margin expansion. Wells Faro set a $126 price target on MGP stock based on a 25X P/E multiple and 17X EV/EBITDA multiple.
Several elite hedge funds tracked by Insider Monkey have stakes in MGP Ingredients Inc (NASDAQ:MGPI) as of the end of the second quarter. These include Driehaus Capital, Arrowstreet Capital and Ken Griffin’s Citadel Investment Group.
9. Corby Spirit and Wine Limited (OTCMKTS:CRBBF)
Number of Hedge Fund Holders: N/A
Corby Spirit and Wine Limited (OTCMKTS:CRBBF) is a Canadian wine company that was set up in 1859. The firm manufactures and sells spirits and wines in Canada, the United States, the United Kingdom, and other countries. Some of its well known brands include Chivas Regal, Absolut vodka, and Mumm Champagne.
A key business strategy of Corby Spirit and Wine Limited (OTCMKTS:CRBBF) is to import its spirits and products into the U.S., and on this front, the company is slated to heavily benefit from the Federal Reserve’s aggressive policy of interest rate increases. These have led to the U.S. dollar touching its strongest level in decades and it allows the company to buy more products for import.
Furthermore, its latest fiscal year results revealed that while revenue grew by only 2%, cash flows grew by $4.7 million, which indicates astute management decision making in driving down working capital requirements at a time nearly every firm is suffering from supply chain constraints and rising costs of doing business. These cash flows allowed Corby Spirit and Wine Limited (OTCMKTS:CRBBF) to declare a 24 cent dividend for a 5% yield, with the dividend marking an annual increase of 14%.
8. LVMH Moët Hennessy – Louis Vuitton, Société Européenne (OTCMKTS:LVMHF)
Number of Hedge Fund Holders: N/A
LVMH Moët Hennessy – Louis Vuitton, Société Européenne (OTCMKTS:LVMHF) is a French luxury goods company that is headquartered in Paris. The firm is known for providing wine, champagne, and spirits under several brands such as Ruinart, Hennessy, and Cape Mentelle.
LVMH Moët Hennessy – Louis Vuitton, Société Européenne (OTCMKTS:LVMHF)’s first half of 2022 results that were revealed at the end of July 2022 were nothing short of spectacular as the firm saw double digit growth rates across all of its product portfolios. This solidifies our assessment at the start of this piece that the world’s wealthiest have remained unencumbered with their spending even during times of historic inflation. During H1 2022, LVMH Moët Hennessy – Louis Vuitton, Société Européenne (OTCMKTS:LVMHF)’s revenues grew by 21%, while its second quarter revenues grew by 27%.
The bulk of the second quarter growth came organically, showing that the firm expanded its market share instead of riding the inflationary wave. During H1 2022, LVMH Moët Hennessy – Louis Vuitton, Société Européenne (OTCMKTS:LVMHF)’s wine business grew by 23%, out of which 14% was organic growth.
Barclays increased LVMH Moët Hennessy – Louis Vuitton, Société Européenne (OTCMKTS:LVMHF)’s share price target to EUR840 from EUR825 in September 2022.
7. Splash Beverage Group Inc (NYSEAMERICAN:SBEV)
Number of Hedge Fund Holders: 3
Splash Beverage Group Inc (NYSEAMERICAN:SBEV) makes tequilas, sports drinks and wine. The company recently said that Central Distributors of Las Vegas will now distribute its SALT Tequila brand across Nevada. The company is also signing several deals in other cities of the US as well as in Mexico.
Splash Beverage Group Inc (NYSEAMERICAN:SBEV) revenue jumped over 80% in the first quarter of 2022.
In June, Splash Beverage Group Inc (NYSEAMERICAN:SBEV) said it acquired 80% of Pulpoloco Sangria, a Spanish beverage company. The deal would give Splash control over the manufacturing and distribution of Pulpoloco across the US.
A total of 3 hedge funds in our database of 895 funds have stakes in Splash Beverage.
6. Eastside Distilling Inc. (NASDAQ:EAST)
Number of Hedge Fund Holders: 1
Eastside Distilling Inc. (NASDAQ:EAST) is a young wine company that was set up in 2008 and is headquartered in Portland, Oregon, the United States. It sells several kinds of alcoholic beverages and also provides canning and bottling services to the beer and cider industries.
Eastside Distilling Inc. (NASDAQ:EAST)’s latest quarter saw its sales drop but at the same time, the firm navigated both inflation driven demand drops and supply chain uncertainties by managing to significantly increase its margins. Its digital can printer can print 100% recyclable cans, lending the firm a unique advantage in today’s ESG driven investing environment. During its second quarter, the firm brought in $1.5 million in gross profit, for a sharp annual increase of $600,000 or nearly 66%. At the same time, Eastside Distilling Inc. (NASDAQ:EAST)’s gross margins stood at 31% with its spirits segment leading the charge with 53% gross margins.
The only Eastside Distilling Inc. (NASDAQ:EAST) investor in our database is Jim Simons’s Renaissance Technologies which owns 73,570 shares that are worth $51,000 as of Q2 2022.
The Duckhorn Portfolio, Inc. (NYSE:NAPA), Diageo plc (NYSE:DEO), and Constellation Brands, Inc. (NYSE:STZ) are met by Eastside Distilling Inc. (NASDAQ:EAST) in our list of favorite wine stocks.
5. Compañía Cervecerías Unidas S.A. (NYSE:CCU)
Number of Hedge Fund Holders: 9
Compañía Cervecerías Unidas S.A. (NYSE:CCU) is a Chilean beverage company that sells both beverages and wine. The firm was set up in 1850 and is based in Santiago, Chile. It also has a partnership with Pernod Ricard to sell the company’s products in non-supermarket stores.
Compañía Cervecerías Unidas S.A. (NYSE:CCU) is Chile’s largest beer company, as it controls 60% of the market as of the second quarter of this year. The firm’s shares also appear to be undervalued, as its P/E ratio of 10x is at historic lows while its earnings continue to be at the median level. This implies that while Compañía Cervecerías Unidas S.A. (NYSE:CCU) is delivering on the earnings front, the market valuation of its shares is driven by exogenous factors such as weak sentiment on the Chilean economy.
Insider Monkey studied 895 hedge fund portfolios during the second quarter of this year and discovered that nine had bought Compañía Cervecerías Unidas S.A. (NYSE:CCU)’s shares.
Out of these, Compañía Cervecerías Unidas S.A. (NYSE:CCU)’s largest investor is Jean-Marie Eveillard’s First Eagle Investment Management which owns 14 million shares that are worth $182 million.
4. Vintage Wine Estates, Inc. (NASDAQ:VWE)
Number of Hedge Fund Holders: 10
Vintage Wine Estates, Inc. (NASDAQ:VWE) is an American wine and craft beer company that is headquartered in Village, Nevada. It is one of the youngest wine companies in the industry since it was set up in 2019. The firm has more than fifty brands of wines and beer that it sells in the U.S., Canada, and other countries.
Vintage Wine Estates, Inc. (NASDAQ:VWE)’s diverse set of brands allows it to focus on all kinds of price ranges. Reflecting the recent trend in wine companies of utilizing a digital sales strategy, Vintage Wine Estates, Inc. (NASDAQ:VWE) has also incorporated an omnichannel distribution approach that allows it to deliver directly to customers, wholesalers, and businesses. It also has a strong vineyard presence, as it sources its products from close to 3,000 vineyards across the U.S. – lending Vintage Wine Estates, Inc. (NASDAQ:VWE) supply stability in case some of its vineyards stop production.
10 out of the 895 hedge funds polled by Insider Monkey had held a stake in the company as part of their Q2 2022 holdings.
Vintage Wine Estates, Inc. (NASDAQ:VWE)’s largest investor is David Paradice’s Paradice Investment Management which owns 3.8 million shares that are worth $30 million.
3. The Duckhorn Portfolio, Inc. (NYSE:NAPA)
Number of Hedge Fund Holders: 13
The Duckhorn Portfolio, Inc. (NYSE:NAPA) is an American wine company based out of Saint Helena, California. It sells several different wine brands and conducts sales directly to retailers, customers, and distributors.
The Duckhorn Portfolio, Inc. (NYSE:NAPA)’s sales for the first quarter of this year grew by 11% annually and were driven primarily by the volumes of products shipped. For the remainder of this year, the midpoint of the company’s guided revenue entails that annually, its revenue stands to grow at 10%. The earnings guidance which currently stands between $0.59 and $0.62 implies a high price to earnings multiple of 30.2. This makes The Duckhorn Portfolio, Inc. (NYSE:NAPA) a growth stock, even when compared to some of its larger peers.
However, investment bank JP Morgan believes that The Duckhorn Portfolio, Inc. (NYSE:NAPA) will issue weak revenue guidance for its fiscal year 2023, due to which the bank cut the company’s share price target to $19 from $24 in September 2022. However, JP Morgan’s Andrea Teixeira said that Duckhorn Portfolio Inc (NYSE:NAPA)’s long-term prospects are promising.
13 out of the 895 funds part of Insider Monkey’s survey for their second quarter of 2022 holdings had held a stake in the company.
The Duckhorn Portfolio, Inc. (NYSE:NAPA)’s largest investor is Robert Joseph Caruso’s Select Equity Group which owns 6.9 million shares that are worth $144 million.
2. Diageo plc (NYSE:DEO)
Number of Hedge Fund Holders: 22
Diageo plc (NYSE:DEO) is a British company that was set up in 1886. The firm sells several kinds of alcoholic drinks, including wine, tequila, several kinds of whiskies, and brandy. It is headquartered in London, the United Kingdom.
Diageo plc (NYSE:DEO) was one of the strongest performers during the coronavirus pandemic, with its revenue falling by only 9% in 2020 and managing to grow once again by 8% in 2021. The 8% figure came at a time when the British pound was declining in value, and when these fluctuations are removed, revenue growth actually stood at 16%. Its latest fiscal year saw Diageo plc (NYSE:DEO) grow revenues by another 21% – with the last quarter starting to mark record high inflation in Britain. The firm also aims to return up to GBP4.5 billion to shareholders by the end of June 2023, and it currently pays a 95 cent dividend for a 2.17% yield.
Insider Monkey profiled 895 hedge funds during this year’s June quarter and discovered that 22 had invested in Diageo plc (NYSE:DEO).
Nicolai Tangen’s Ako Capital is Diageo plc (NYSE:DEO)’s largest investor in our database. It owns 1.7 million shares that are worth $296 million.
ClearBridge Investments mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
“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.”
1. Constellation Brands, Inc. (NYSE:STZ)
Number of Hedge Fund Holders: 44
Constellation Brands, Inc. (NYSE:STZ) is an American company that sells beers, wines, and spirits in the U.S., Canada, Mexico, and other countries. It is best known for its Corona beer lineup, and the firm also has fifteen different wine brands. Constellation Brands, Inc. (NYSE:STZ) is headquartered in Victor, New York.
Constellation Brands, Inc. (NYSE:STZ) is the largest high end beer provider in the U.S., and the firm has increased its production capacity fourfold over the past nine years to keep hold of the market. To further increase production, the company’s Obregon Brewery will come online by the end of the current year to add another 39 million hectoliters to its production capacity.
Constellation Brands, Inc. (NYSE:STZ) also pays an 80 cent dividend for a 1.32% yield.
44 of the 895 hedge funds polled by Insider Monkey had invested in Constellation Brands, Inc. (NYSE:STZ) as part of their Q2 2022 investments. BMO Capital set a $280 price target for the company in September 2022, stating that its valuation discount to peers is simply too wide to ignore.
Constellation Brands, Inc. (NYSE:STZ)’s largest investor is Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital which owns 1.3 million shares that are worth $326 million.
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Disclosure: None. 10 Best Wine Stocks to Invest In 2022 is originally published on Insider Monkey.
