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.”
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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).
8. Keysight Technologies, Inc. (NYSE:KEYS)
Number of Hedge Fund Holders: 36
When a caller asked Cramer about Keysight Technologies, Inc. (NYSE:KEYS), he enthusiastically said:
“Yeah, we want this one. We want this one. This is a company that has solutions. First of all, it’s not expensive at all…. Terrific business, niche business. I like it and I think you should own it and I think you should buy it.”
Keysight (NYSE:KEYS) offers a broad range of electronic design and test solutions, including software and measurement instruments, across multiple industries such as communications, aerospace, and energy.
Madison Investments stated the following regarding Keysight Technologies, Inc. (NYSE:KEYS) in its Q3 2024 investor letter:
“We purchased a stake in Keysight Technologies, Inc. (NYSE:KEYS). Keysight is a leading electronic test and measurement company with a reputation for manufacturing highly reliable oscilloscopes, network analyzers, signal generators, and spectrum analyzers. Keysight serves a wide range of customers across telecommunication, data centers, semiconductors, and industrial markets. Its instruments are absolutely mission critical for the research and development as well as deployment of just about anything with sophisticated electronic componentry or signals. For instance, without Keysight’s instruments, telecommunication carriers couldn’t deploy 5G networks and semiconductor manufacturers couldn’t test the performance of their circuitry. Customers are very sticky and brand loyal as it takes years to establish a good reputation among engineers. This means that Keysight primarily competes on the quality of its products rather than price.”
7. NovoCure Limited (NASDAQ:NVCR)
Number of Hedge Fund Holders: 25
Cramer admitted that he used to be a big fan of NovoCure Limited (NASDAQ:NVCR) but noted that the company has not made money.
“I’ll tell you, I used to be a very big fan of this company, but you know what, I have watched them for years and years and they’re not making money and I just think that they should be making money. They’ve got good revenues, but they’re kind of flat. Let’s see some money made by Novocure and then we can get behind it.”
NovoCure Limited (NASDAQ:NVCR) is an oncology company focused on developing and commercializing tumor treating fields (TTFields) devices, including Optune Gio and Optune Lua, for treating solid tumor cancers, with ongoing clinical trials exploring their use in various cancers. Cramer has not changed his opinion about the company, which is evident from the comment he made in June 2024:
“I featured them many times and I’ve got to tell you I was hoping that they would start making money and they don’t make money and at a certain point I made a decision on this show that I was not going to recommend stocks that lose hideous amounts of money and I am not changing my mind I’m not going back on that.”
6. ADMA Biologics, Inc. (NASDAQ:ADMA)
Number of Hedge Fund Holders: 25
Cramer noted that ADMA Biologics, Inc. (NASDAQ:ADMA) has “earnings” and appreciated its plasma-derived therapeutics but advised to wait for the stock to come down.
“I, well, okay, so it does have earnings, which is a terrific difference. Not that much of a spec and it does great blood plasma work. My problem is, I don’t have a catalyst. I think the stock at 40 times earnings is a little too rich. I would wait for it to come down before I would pull the trigger.”
ADMA Biologics (NASDAQ:ADMA) is a biopharmaceutical company focused on developing and marketing plasma-derived biologics for treating immune deficiencies and infectious diseases, with products like BIVIGAM, ASCENIV, and Nabi-HB, along with a pipeline targeting S. pneumonia infections. Cramer was asked about the company in August 2024 and he noted that the stock is a spec as he commented:
“This is a very speculative situation…Any time there’s immunity compromised patients, there’s some big money down the road.”
5. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 58
When a caller asked Cramer about Lockheed Martin Corporation (NYSE:LMT), L3Harris, RTX, and Northrop Grumman, he said:
“Lockheed Martin is a stock that frankly has come down so much that it’s getting hard for me to dislike it with James Taiclet at the top. However, I think the administration is far more focused on the idea of a Palantir-like solution to procurement and that would be very bad for all the companies you just mentioned. So I do not want to get in the way of the Palantir buzz saw because that’s very close to Elon Musk and that’s where I am.”
Lockheed (NYSE:LMT) is a worldwide leader in security and aerospace, specializing in the design, development, and production of cutting-edge technology systems, products, and services for the defense, aerospace, and space sectors. Over the past 12 months, LMT stock is up only over 5% while Palantir stock has gained more than 375%.
4. Constellation Brands, Inc. (NYSE:STZ)
Number of Hedge Fund Holders: 36
Cramer criticized Constellation Brands, Inc. (NYSE:STZ) for its poor performance in wine and spirits, stating the company should have sold that part of the business earlier.
“The wine and spirits from Constellation Brands were so challenged, I wish they’d just sold the business a long time ago. Just a very bad miss. Beer’s holding up okay, but not enough to make Wall Street like the stock. Oh man… My Charitable Trust is stuck with it.”
Constellation (NYSE:STZ) is a major player in the production, import, marketing, and sale of beer, wine, and spirits, with its beer offerings spanning several brands. On January 3, Cramer discussed the company as he said:
“It’s a bedraggled liquor stock we own for my Charitable Trust that’s been up and down and up and now mostly down. It’s a bit of a jobe stock. Right now, alcohol is under siege by everyone from the Surgeon General this morning for link to cancer to the GLP-1 drugs, which blunt the craving to the, in the case of Constellation, potential tariffs on its Mexican beers, Modelo and Corona, plus an endangered population of drinkers of some significance, the Hispanic immigration cohort that could be hassled or deported by the authorities under Trump.”
At that time, Cramer maintained that it was a good investment, citing its strong cash flow and growth prospects. He also suggested that the incoming president could potentially exempt imported beer from tariffs, which would benefit Constellation (NYSE:STZ).
3. Diageo plc (NYSE:DEO)
Number of Hedge Fund Holders: 26
Calling Diageo plc (NYSE:DEO) stock “horrendous”, Cramer remarked:
“Diageo’s been a horrendous stock, befits a company that makes the Johnnie Walker and all his cousins, the Captain, Don Julio, Tanqueray, Casamigos, ugh, Ketel One, Crown Royal, and Bulleit.”
Diageo (NYSE:DEO) produces, markets, and sells a diverse range of alcoholic beverages, including spirits, beer, and non-alcoholic products, under various well-known brands. As Cramer discussed alcohol stocks in December 2024, he said:
“If we see some signs that younger people are drinking more or the GLP-1s aren’t having as much of an effect or impact on alcohol, then I’ll happily change my mind on both Brown-Forman and Diageo. But until then, you know what? I got to stay on the sidelines.”
It is worth noting that Oakmark Funds stated the following regarding Diageo plc (NYSE:DEO) in its Q4 2024 investor letter:
“Diageo plc (NYSE:DEO) is a global producer, distributor and marketer of premium drinks with more than 200 brands and sales in nearly 180 countries. The U.K.-based holding company’s portfolio includes leading brands, such as Johnnie Walker, Guinness, Don Julio, Crown Royal, Smirnoff, Baileys, Casamigos and Captain Morgan. As a market leader, Diageo’s scale provides meaningful competitive advantages in terms of distribution and marketing, which enables the company to invest more than its peers while still generating strong returns on capital. In addition, we like that the company’s portfolio is well diversified by geography and category, which helps mitigate against earnings volatility related to economic cyclicality and shifting consumer preferences. Industry destocking and what we believe is temporary weaker demand have weighed on the share price recently, which provided an attractive re-entry point to invest in this dominant beverage company at a below-average price.”
2. Brown-Forman Corporation (NYSE:BF-B)
Number of Hedge Fund Holders: 24
Discussing Brown-Forman Corporation (NYSE:BF-B) Cramer said:
“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.”
1. LVMH Moët Hennessy – Louis Vuitton, Société Européenne (OTC:LVMUY)
Number of Hedge Fund Holders: N/A
LVMH Moët Hennessy – Louis Vuitton, Société Européenne’s (OTC:LVMUY) is a global luxury goods conglomerate offering a wide range of high-end products, including wines, spirits, fashion, perfumes, cosmetics, and more. Cramer mentioned that the company reported a significant decline in 2024 as he said:
“Look, I was praying that LVMH, company represents the best of the best, would tell us they had a terrific wine and spirits quarter… but sadly, that’s not what happened. Last night, LVMH, best of the best, reported a 36% decline in wine and spirits in 2024. That’s a number that must send a shudder through anyone involved in the liquor business. These are practically prohibition numbers.
And keep in mind, LVMH has some amazing brands, Hennessy, Glenmorangie, Château Cheval Blanc, Colgin… Ardbeg, Belvedere vodka. I’m giving them a pass on their high-end champagnes, Dom Pérignon, and Veuve Clicquot because these are holding up, but that’s not enough to support this entire business. Wow.”
While we acknowledge the potential of LVMH Moët Hennessy – Louis Vuitton, Société Européenne (OTC:LVMUY) 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 LVMUY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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