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.”
