Beer Loses Fizz as Spirits Gain Popularity: Top 10 Stocks to Buy

7. MGP Ingredients, Inc. (NASDAQ:MGPI)

Number of Hedge Fund Investors  in Q1 2024: 22

MGP Ingredients, Inc. (NASDAQ:MGPI) is the first pure play spirits company on our list. It sells both distilled spirits and branded spirits. Since it is a pure play spirits company, MGP Ingredients, Inc. (NASDAQ:MGPI) can focus on all kinds of products which enables it to better target the highly growing spirits industry. Its products are primarily divided into aged and new distillates, with each category offering its benefits and drawbacks. Aged products are sold on the spot market and have higher, which means that MGP Ingredients, Inc. (NASDAQ:MGPI) can recover its working capital quickly compared to new product sales as contracts for these are booked for longer time periods. However, the latter comes with higher margins, which means that investor sentiment is mixed especially during a high inflation market. To navigate investor pessimism surrounding growth in low margin new distillate sales, MGP Ingredients, Inc. (NASDAQ:MGPI) shut down a plant earlier this year to lower its costs. Finally, the firm’s reliance only on the spirits industry also means that it remains vulnerable to a downturn in the sector.

Ariel Investments mentioned MGP Ingredients, Inc. (NASDAQ:MGPI) in its Q2 2024 investor letter. Here is what the firm said:

“Also in the quarter, we initiated a new position in leading spirits manufacturer, MGP Ingredients, Inc. (MGPI). After years of successfully developing products for third parties, MGPI entered the branded spirits business. Leveraging its scale and know-how, MGPI is turning existing relationships into growth stories by acquiring and scaling niche premium brands. A recent strategic decision to shut down a distillery in Kansas and concerns around peak whiskey demand amidst a challenging macro environment have placed pressure on the stock. However, we believe the core business is stable and expect branded spirit acquisitions to drive top-line growth and expand margins longer-term.”