The Smart Money Is Fond of These Five Alcohol Stocks

With the S&P 500 near all-time highs, it isn’t surprising that many alcohol names have done very well. Alcohol stocks combine the stability of a consumer staple with the dividend yield of a mature company to produce a return profile that all shareholders can drink too. Seeing as the smart money recently filed their quarterly 13Fs for the first quarter, let’s take a closer look at the smart money’s favorite alcohol stocks, which include Constellation Brands, Inc. (NYSE:STZ), Molson Coors Brewing Company (NYSE:TAP), Anheuser Busch Inbev SA (ADR) (NYSE:BUD), Ambev SA (ADR) (NYSE:ABEV), and Diageo plc (ADR) (NYSE:DEO).

While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).

#5 Diageo plc (ADR) (NYSE:DEO)

– Number of Hedge Fund Holders (as of March 31): 19
– Total Value of Hedge Fund Holdings (as of March 31): $1.2 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 1.60%

Overall, 19 funds among those tracked by Insider Monkey owned shares of Diageo plc (ADR) (NYSE:DEO) at the end of the first quarter, unchanged from the previous quarter. Among the funds that recently established position in the stock is Peter Rathjens, Bruce Clarke And John Campbell‘s Arrowstreet Capital, which bought more than 2 million shares during the quarter. Diageo’s shares are 2.6% in the green year-to-date, aided in part by Diageo naming Javier Ferran as the new Chairman of the board in May. Ferran replaced Dr. Franz B Humer.

#4 Ambev SA (ADR) (NYSE:ABEV)

– Number of Hedge Fund Holders (as of March 31): 24
– Total Value of Hedge Fund Holdings (as of March 31): $415.2 million
– Hedge Fund Holdings as Percent of Float (as of March 31): 0.50%

Although Brazil is in its worst recession since the Great Depression, Brazil’s largest brewer, Ambev SA (ADR) (NYSE:ABEV), has done very well in 2016. Shares are up 20% year-to-date as speculators buy the stock in anticipation of better macroeconomic improvement in Brazil. Aiding the bullish thesis for Brazil’s economy are rising crude prices and political change. The valuation of Ambev isn’t stretched either, with the stock trading for 19 times forward earnings estimates, in-line with its peers.

#3 Anheuser Busch Inbev SA (ADR) (NYSE:BUD)

– Number of Hedge Fund Holders (as of March 31): 32
– Total Value of Hedge Fund Holdings (as of March 31): $5.15 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 2.60%

Anheuser Busch Inbev SA (ADR) (NYSE:BUD)’s mega-merger with SAB Miller cleared another hurdle in May after the European Commission gave the thumbs up for the deal. Although Anheuser-Busch InBev divested some assets to get the European Commission’s blessing, the company will still be able to realize substantial synergies from the merger. 32 elite funds owned shares of the alcohol giant at the end of March, down four from that of the previous quarter. Anheuser currently pays an annual dividend of $3.97 per share, which gives its stock a 3% dividend yield.

#2 Molson Coors Brewing Company (NYSE:TAP)

– Number of Hedge Fund Holders (as of March 31): 52
– Total Value of Hedge Fund Holdings (as of March 31): $2.71 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 17.30%

With 52 funds from our database owning shares of at the end of the first quarter, Molson Coors Brewing Company (NYSE:TAP) is the second most popular alcohol stock on our list. Molson Coors reported better-than-expected first quarter results, with EPS of $0.54 on sales of $657.2 million, exceeding the consensus estimates by $0.11 per share and $31.33 million, respectively. Global beer volumes rose 1.2% year-over-year, while Coors Light volume rose 3.5% year-over-year. Although net sales shrank by 6.1% on a reported basis, they increased by 0.1% on a constant currency basis. The shares trade at a forward P/E of 19.7.

#1 Constellation Brands, Inc. (NYSE:STZ)

– Number of Hedge Fund Holders (as of March 31): 71
– Total Value of Hedge Fund Holdings (as of March 31): $5.43 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 18.00%

Analysts at Evercore ISI have a $190 price target on Constellation Brands, noting the company’s EBIT margins will likely trend higher in the intermediate future. Analysts at SunTrust are likewise bullish, with a ‘Buy’ rating and a $180 price target, which has been recently raised from $170. The smart money is bullish too, since 71 funds that we track owned shares of Constellation Brands, Inc. (NYSE:STZ) at the end of March, up from 67 at the end of 2015. Among the funds that added to their position in the first quarter include Dan Loeb’s Third Point, which raised its stake by 11% to 1.76 million shares. All the love from the smart money and analysts have helped Constellation’s stock rally 11% year-to-date.

Disclosure: none