We recently published a list of 12 Best FMCG Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Constellation Brands, Inc. (NYSE:STZ) stands against other best FMCG stocks to buy according to hedge funds.
Consumer Staples Outlook For 2025
Consumer staples refer to essential daily-use products such as packaged food, toothpaste, and dish detergent. These products often run out quickly off the supermarket shelves and are considered “defensive” because consumers continue to purchase these necessities even during economic downturns. Moreover, consumer staple companies are mostly mature dividend payers.
On December 10, 2024, Ben Shuleva, Fidelity Sector Portfolio Manager shared his outlook for the sector in a report published on Fidelity Investments. The consumer staples sector had a positive year but lagged behind the broader market due to investors favoring higher-growth stocks. The high interest rates and concerns about GLP-1 weight-loss drugs affecting food consumption also impacted performance negatively. However, despite these challenges, the sector still posted strong absolute gains. Compared to the S&P 500 index the consumer staple sector gained 16.7% on a year-to-date basis as of December 9, whereas the S&P 500 index gained 26.9% during the same time.
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Ben Shuleva from Fidelity Investments anticipates a return to normalcy for the consumer staples sector in 2025. He suggests this based on a broadly stable economic environment with healthy employment and steady real wage growth. In addition, the Fed is expected to begin cutting interest rates, which could boost dividend-paying stocks. Lastly, consumer spending has remained strong and is expected to remain resilient in 2025, thereby indicating positive sales growth for the sector. Shuleva anticipates that these factors will lead the sector to outperform the broader market in 2025. However, there could be a few uncertainties that could hamper the growth trajectory. The new presidential administration may introduce changes in tariff policies, which could affect certain consumer staples products. Although most consumer staples are manufactured domestically, so the direct impact of tariffs might be limited. Moreover, a strengthening US dollar can negatively affect consumer staples companies with international operations by reducing their foreign earnings when converted back into dollars. Shuleva emphasizes focusing on core fundamentals when investing in consumer staple companies, such as those operating in favorable market structures and maintaining strong underlying growth profiles.
Our Methodology
To complete the list of the 12 best FMCG stocks to buy according to hedge funds, we used the Consumer Staples Select Sector SPDR Fund and Vanguard Consumer Staples ETF. We selected pure-play Fast-Moving Consumer Goods-producing companies from the holdings of these two ETFs and ranked them in ascending order of the number of hedge funds that held stakes in them at the close of the third quarter. The number of hedge funds was sourced from Insider Monkey’s third-quarter 2024 database.
Why do we care about what hedge funds do? 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).
A winemaker examining a glass of red wine from a barrel in a cellar.
Constellation Brands, Inc. (NYSE:STZ)
Number of Hedge Fund Holders: 36
Constellation Brands, Inc. (NYSE:STZ) is a major alcohol and beverage company that produces and sells beer, wine, and spirits. It is one of the largest beer importers in the United States with popular brands such as Corona Extra, Modelo Especial, and Pacifico. The company produces these beers in Mexico but sells them exclusively in the United States.
On February 3, RBC Capital Markets maintained their Buy rating on the stock and kept the price target of $293 constant. During the fiscal third quarter of 2025, Constellation Brands, Inc. (NYSE:STZ) reported increasing its net sales for the beer segment by 3%. Management attributed this growth to higher shipment volumes. Moreover, its core brands continued to contribute growth with Modelo Especial growing 3% and Pacifico growing 20% year-over-year.
There have been doubts that the company might face trouble with Donald Trump’s announcement of 25% tariffs on imports from Mexico. However, management has made sure to arrange adequate inventory and plans to place cost-cutting measures to absorb tariffs. Constellation Brands, Inc. (NYSE:STZ) is one of the best FMCG stocks to buy according to hedge funds.
Coho Relative Value Equity Strategy stated the following regarding Constellation Brands, Inc. (NYSE:STZ) in its Q2 2024 investor letter:
“We also eliminated Conagra (CAG) in favor of a better risk/return for Constellation Brands, Inc. (NYSE:STZ). 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, STZ ranks 10th on our list of best FMCG stocks to buy according to hedge funds. While we acknowledge the potential of STZ to grow, our conviction lies in the belief that 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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Disclosure: None. This article is originally published at Insider Monkey.
