We recently compiled a list of the 10 Best Liquor Stocks To Buy According to Short Sellers. In this article, we are going to take a look at where Compañía Cervecerías Unidas S.A. (NYSE:CCU) stands against the other liquor stocks.
Short selling is a strategy where traders profit from the decline in the price of a stock or other securities. It is when traders can borrow shares and sell them, hoping to purchase them back when they are cheaper. The strategy allows traders to capitalize on stocks or markets they feel are overvalued, giving them more opportunities to make a profit.
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Short sellers in America had a tough year in 2024, as the broader US market posted gains of over 23%, building on a gain of over 24% from 2023. The two-year uptick of 53% is the highest since the almost 66% rally in 1997 and 1998. As a result, short sellers were down $180.9 billion in last year’s mark-to-market losses, representing a decrease of approx. 15% on an average short interest of $1.2 trillion. The sectors where shorts performed the worst are, unsurprisingly, Information Technology and Communication Services, as tech stocks surged the most last year. However, the European market has recently been a popular playground for short sellers amid the region’s sluggish economic and earnings growth and political instability in France and Germany.
The alcohol sector also seems like an attractive option for short selling, especially after the recent advisory by the US Surgeon General Vivek Murthy that consuming alcohol increases the risk of at least seven types of cancer, including breast, colon, and liver cancer. The report claims that alcohol consumption in the US is directly linked to approximately 100,000 cancer cases and 20,000 deaths annually. As such, Mr. Murthy has proposed to put cancer warning labels on alcoholic beverages, signaling a shift toward more aggressive tobacco-style regulation for the sector if adopted. The Surgeon General also called to reassess the guidelines on alcohol consumption limits, so consumers can weigh the risks more accurately.
The advisory also managed to impact the financial market, sending down the stocks of several major alcohol players in the country, in some cases by over 3%. This comes at a time when the alcohol sector is already facing some major headwinds, including a downturn in sales following the pandemic boom, threats of looming tariffs, competition from alternative beverages, and the rapidly rising trend of abstinence. More and more Americans, especially the younger generations, are becoming increasingly conscious about health and wellness and saying ‘no’ to alcohol. According to the National Institute on Alcohol Abuse and Alcoholism, America’s per capita annual consumption of alcohol in 2022 was 2.5 gallons, down from 3.28 gallons in the early 1980s.
However, this shift has marked a new opportunity for the alcohol industry, which has responded by flooding the market with a wide range of low- and no-alcohol beverages. The strategy seems to be paying off, as according to Nielsen, non-alcoholic beer, wine, and spirits collectively surpassed $565 million in sales in 2023, up 35% from the year before.
There are also doubts over how effective putting warning labels on alcoholic beverages will be since ingrained habits are hard to change and similar labels have done little to curb smoking. Some experts remain optimistic. Paul Gilbert, an associate professor at the University of Iowa College of Public Health, believes that it is unlikely that people will immediately change their drinking habits following the Surgeon General’s report, but it could eventually lead to changes in how people perceive their risk.
Methodology:
To collect data for this article, we looked up the 20 Largest Publicly Traded Liquor Companies in the US and then picked out the ones with the lowest short percentage. The stocks are sorted in descending order of their short interest, as of December 13, 2024.
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A brewery worker pouring bottles of freshly brewed beer into boxes, representing the company’s alcoholic beer beverages.
Compañía Cervecerías Unidas S.A. (NYSE:CCU)
Short % of Shares Outstanding: 0.61%
Compañía Cervecerías Unidas S.A. (NYSE:CCU) is a beverage giant that operates in Chile, Peru, Argentina, Bolivia, Colombia, Paraguay, and Uruguay. The company is one of the largest players in each one of the beverage categories in which it participates and is best known for its highly popular Cristal brand in its home country of Chile.
Compañía Cervecerías Unidas S.A. (NYSE:CCU) reported mixed results in the third quarter of 2024 as organic volumes were down 6.9%, primarily due to weakened demand in Argentina, though it is starting to see a sequential improvement. However, the company’s Chilean segment saw a 7% revenue increase, driven by a hike in prices and improved volumes. The Wine Operating segment also posted a top line expansion of 3.3%, mostly due to a boost in volumes in the domestic market. All in all, CCU managed to achieve a net profit of CLP 29.55 billion (around $29.5 million) during the quarter, a significant 211% increase from the same period last year.
Compañía Cervecerías Unidas S.A. (NYSE:CCU) remains committed to expanding its footprint in the South American market and it was announced last month that the beverage giant, which distributes PepsiCo products in Chile, has struck a deal for its rights also in Paraguay. The company has acquired a 51% stake in Bebidas del Paraguay, Distribuidora del Paraguay, and AV, in association with Vierci Group. This marks the landlocked country of Paraguay as the second market where CCU holds the PepsiCo license, promising future growth and investment opportunities.
Compañía Cervecerías Unidas S.A. (NYSE:CCU) continues to expand its product line to respond to an ever-evolving demand and recently launched Escudo Maki, a limited-edition variety produced with wild maquis collected by an agricultural cooperative in the south of Chile. Moreover, its subsidiary CPCh launched ‘Hard Fresh: Hard Soda’, a 5% ABV ready-to-drink cocktail in response to the growing demand for low-alcohol options especially among the younger generations. CCU’s Mistral brand also recently launched Mistral Nobel Cristalino, a crystalline pisco, as a response to a growing trend.
Overall CCU ranks 4th on our list of the best alcohol stocks according to short sellers. While we acknowledge the potential for CCU as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CCU 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 is originally published at Insider Monkey.
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