In this article, we discuss the 5 cheap stocks to buy before Christmas. If you want to read our detailed analysis of these stocks, go directly to the 10 Cheap Stocks to Buy Before Christmas.
5. Ambev S.A. (NYSE:ABEV)
Number of Hedge Fund Holders: 18
Share Price as of November 4, 2021: $3.14
Ambev S.A. (NYSE:ABEV) makes and sells beer, carbonated drinks, and other non-alcoholic beverages. It primarily operates in Latin America. The holiday season is a significant source of revenue for the company as sales during the period increase dramatically compared to other months of the year. Bank of America recently upgraded the stock to Neutral from Underperform with a R$18.60 target.
Jean Jereissati, the CEO of Ambev S.A. (NYSE:ABEV), during the third quarter earnings call, said that the company had delivered a 20% net revenue growth in the quarter with volumes up 8% year-on-year despite undergoing a transformation.
At the end of the second quarter of 2021, 18 hedge funds in the database of Insider Monkey held stakes worth $301 million in Ambev S.A. (NYSE:ABEV), the same as in the preceding quarter worth $228 million.
“We also diversified our beer exposure during the quarter, adding a direct investment in Ambev (ABEV) to compliment our existing investment in Anheuser Busch Inbev (BUD). As the current environment has punished highly leveraged businesses like BUD (despite the company’s ability to generate strong and recurring cash flow), the opportunity to own ABEV, with net cash on its balance sheet and the highest returns on capital in the industry—at a lower multiple than its parent—was too good to pass up.
Together, these names represent roughly 20% of our capital today. Given their cheap valuations, combined with the fact that beer and tobacco consumption has historically increased during recession, one could argue that we should have even more exposure to these Sin Stocks. In principle, we agree, and given the opportunity, we’d be happy to increase our positions. But in the interim, we are highly sensitive to maintaining balance in the portfolio. At one end, we own high quality, defensive businesses that should fare well in almost any environment. At the other end, we’ve begun building a portfolio of more cyclical businesses, positioned to rebound sharply and gain share once the clouds clear. We discuss a few of these investments below.”