1. Keurig Dr Pepper Inc. (NASDAQ:KDP)
Number of Hedge Fund Holders: 38
With 38 hedge fund investors in the IM database in Q3 2024, Keurig Dr Pepper Inc. (NASDAQ:KDP) is the Best Alcohol Stock According to Hedge Funds. KDP is a leading beverage company in North America, with a portfolio of more than 125 owned, licensed, and partner brands and powerful distribution capabilities. Though not a brewing company itself, Keurig Dr Pepper Inc. (NASDAQ:KDP) made inroads into the beer business when it acquired a $50 million stake in the non-alcoholic beer producer Athletic Brewing in 2022. The investment represented the beverage giant’s diversification into the rapidly emerging beverage categories and followed its acquisition of the NA ready-to-drink cocktail brand Atypique.
Keurig Dr Pepper Inc. (NASDAQ:KDP)’s shopping spree still continues, as it has recently reached an agreement to purchase a majority stake in energy-drink maker GHOST for $990 million, with plans to purchase the rest in 2028. The brand will become a part of KDP’s US refreshment beverages segment, which made up nearly 60% of its total sales last year. However, the acquisition comes at a time when the energy drink category has slowed down in the US, largely due to weak traffic at convenience stores.
Tim Cofer, CEO of Keurig Dr Pepper Inc. (NASDAQ:KDP), stated:
“GHOST is a differentiated brand with significant growth potential, and we are excited to partner with its founders to take the business to the next level. This acquisition strengthens our position in the attractive energy drink category, accelerating our portfolio evolution toward consumer-preferred, growth-accretive spaces through a disciplined deal structure.”
Keurig Dr Pepper Inc. (NASDAQ:KDP) gains a significant competitive advantage through its consumer-focused innovation model, household penetration, and loyalty. A great example is how the company transformed the way consumers brew coffee through the introduction of the K-Cup pod single-serve coffee system. The recent launch of K Brew + Chill also exemplifies KDP’s commitment to innovation in response to changing consumer preferences.
Keurig Dr Pepper Inc. (NASDAQ:KDP)’s core refreshment segment, which includes Dr. Pepper, Snapple, Canada Dry, and Sunkist, continued to perform well in Q3 2024, with revenue jumping 5.3% YoY to $2.4 billion. In fact, Dr Pepper even overtook Pepsi for the No. 2 soda market share spot in the US by volume, driven by the use of popular limited-time offerings.
Keurig Dr Pepper Inc. (NASDAQ:KDP)’s cash generation has also strengthened and it is dynamically allocating this cash flow to support multiple parallel priorities. The company generated more than $500 million in free cash flow during Q3, keeping it on track for a meaningful step-up in full-year cash flow compared to 2023. KDP also announced a 7% dividend increase during the quarter, marking its fourth consecutive year of dividend growth and underscoring its commitment to direct shareholder returns.
Overall, Keurig Dr Pepper Inc. (NASDAQ:KDP) ranks first on our list of the best beer stocks. While we acknowledge the potential for KDP to grow, 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 KDP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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