1. Constellation Brands, Inc. (NYSE:STZ)
Number of Hedge Fund Holders: 36
Constellation Brands, Inc. (NYSE:STZ) continues to be the Best Alcohol Stock According to Hedge Funds, with 36 hedge fund holders in Q3 2024 boasting an overall stake value of over $1.14 billion. The New York-based company is involved in the production, import, marketing, and sale of beer, wine, and spirits across the United States, Canada, Mexico, New Zealand, and Italy. STZ also made headlines last summer when its Mexican beer brand, Modelo Especial, became the Best-Selling Beer in America after dethroning Bud Light.
Even after more than a year, there are no major signs of a slowdown. In Q2 2025, Constellation Brands, Inc. (NYSE:STZ)’s beer business (responsible for raking in the lion’s share of its revenue) continued to deliver strong financial performance with net sales and operating income growth of nearly 6% and 13%, respectively. Although the wine and spirits segment declined by 12% in net sales during the second quarter, it accounts for less than 10% of overall earnings. The company also returned almost $250 million of cash to shareholders through share repurchases during the quarter, bringing its total YTD cash returns through repurchases to approximately $450 million. Moreover, for the first half of FY 2025, CB generated free cash flow of $1.2 billion, a 12% increase from the prior period.
Another factor helping Constellation Brands, Inc. (NYSE:STZ) is that America’s Hispanic population (a segment that makes up over 50% of the company’s client mix) is growing almost twice as fast as its general population, so brands like Modelo, Pacifico, and Corona are expected to stay in high demand.
Coho Partners said the following about Constellation Brands, Inc. (NYSE:STZ) in its Q2 2024 investment letter:
“We are encouraged by the Constellation Board’s decision to eliminate the dual voting share class and reprioritize capital allocation away from acquisitions and towards returns to shareholders. With capital spending expected to decline and leverage near the company’s target, more cash flow should be available for shareholders. STZ is now focused on the higher growth and the higher margin premium beer category, which they dominate with Corona Extra, Modelo Especial, and Pacifico. Additionally, the Wine and Spirits business, which has been disappointing is no longer a meaningful part of STZ’s business as it now accounts for less than 10% of overall earnings. We expect STZ to deliver low double-digit growth in both earnings and dividends for many years to come, which is consistent with the Board’s recent approval of a 13.5% dividend hike.”
Overall, Constellation Brands, Inc. (NYSE:STZ) ranks first on our list of the best alcohol stocks. While we acknowledge the potential for STZ 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 STZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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