Five Alcohol Stocks Hedge Funds Like

“There’s a reason you see people in yoga pants all over New York City—not because they’re working out. It’s this idea that a kind of health and well-being is the new premium,” says Valerie Toothman, vice president for marketing innovation at Anheuser-Busch InBev (NYSE:BUD). As consumers are shifting towards a healthier lifestyle, big beverage companies are looking to keep up with their tastes. By using healthy-sounding names and nutrition labels, they are trying to spin alcoholic beverages as more fitness-chic. So let’s have a look at five alcohol stocks that hedge funds are betting on.

While there are many metrics that investors can assess in the investment process, hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).

#5 Diageo plc (ADR) (NYSE:DEO)

-Number of Hedge Fund Holders (as of June 30): 18

-Concentration (as of June 30): 1.3%

First up is Diageo, the British maker of spirits and beer. Hedge fund interest in this stock cooled down a bit during the second quarter, with the number of long positions having inched down to 18 at the end of June from 19 registered three months earlier. Tom Gayner‘s Markel Gayner Asset Management is among the funds betting big on Diageo plc (ADR) (NYSE:DEO), having reported ownership of 1.3 million shares worth $147 million at the end of the quarter. In the most recent quarter, the company returned to growth, as the effects of the pound devaluation and a change in accounting practices in Asia have hurt the final figures. In July, Diageo plc (ADR) (NYSE:DEO) reported its financial results for the fiscal 2016, posting a net profit of £2.24 billion ($2.94 billion), down by 5.8% year-over-year. However, organic sales were up by 2.6%, while organic volume increased by 1.3%. One of the aspects that still keeps investors on their toes is how Brexit is going to affect the company’s business. Diageo’s management said it is holding talks with the government to find ways to maintain access to markets it serves.

#4 Ambev SA (ADR) (NYSE:ABEV)

-Number of Hedge Fund Holders (as of June 30): 21

-Concentration (as of June 30): 0.6%

Next up is Ambev, the Brazilian beverage company that has a wide beverage portfolio on top of spirits. According to our data, 21 of the funds we follow had this stock in their equity portfolio at the end of the second quarter, down from 24 a quarter before. Billionaire Ken Fisher is still bullish on Ambev SA (ADR) (NYSE:ABEV), having increased his fund’s holding of the stock by 8% to 23.7 million shares worth $138 million at the end of June. After a massive slide in 2015, Ambev stock started 2016 on the right foot and has been in an uptrend ever since, managing to advance 45% through yesterday’s closing price of $6.24 per share. The company has market cap of $95 billion and pays an annual dividend of $0.04 per share, providing investors with a 0.64% yield. Ambev SA (ADR) (NYSE:ABEV) shares are currently changing hands at a trailing Price to Earnings (P/E) ratio of 26, which is larger than the industry average P/E of 8.

Turn the page to have a look at the top 3 stocks smart money has invested in.

#3 Anheuser Busch Inbev SA (ADR) (NYSE:BUD)

-Number of Hedge Fund Holders (as of June 30): 35

-Concentration (as of June 30): 2.9%

Anheuser Busch registered a boost in popularity during the quarter, as the number of hedge funds invested rose to 35 from 32 registered at the end of March. Eric W. Mandelblatt’s Soroban Capital Partners held the largest position among the fund’s followed by Insider Monkey. According to its latest 13F filing, Soroban held 7.3 million Anheuser Busch Inbev SA (ADR) (NYSE:BUD) shares valued at $961 million. The company is currently engaged in a merger process with SABMiller, in what could be the largest beer merger in history. If the $106 billion deal goes through, the newly created entity would account for 28% of the global beer market. In some markets, the combined company would have a near-monopolistic status: in Argentina it would have a market share of 79%, while also holding 64% of Brazilian market and 45% of the Mexican one. As a result, the company would be well placed to capitalize from the eventual growth in emerging markets.

#2 Molson Coors Brewing Co (NYSE:TAP)

-Number of Hedge Fund Holders (as of June 30): 57

-Concentration (as of June 30): 17.5%

At the end of the second quarter, Molson Coors could be found in the portfolio of 57 of the funds tracked by Insider Monkey, up from 52 recorded at the end of March. Billionaire Ken Griffin is very optimistic about the prospects of Molson Coors Brewing Co (NYSE:TAP), having boosted his fund’s stake in the company by 46% during the quarter. As reported in its latest 13F filing, Citadel Investment Group held 2.28 million shares worth approximately $231 million. In the most recent quarter, Molson Coors Brewing Co (NYSE:TAP)’s bottom line was significantly affected by currency headwinds and higher brand investments. The company posted adjusted earnings of $1.11 per share, which were in line with analysts’ estimates, and a 1.9% drop in net sales to $986.2 million, topping investor’s expectations of $962 million. As part of the Anheuser Busch-Miller merger, Molson Coors has agreed to acquire Miller’s share in their co-venture, MillerCoors LLC, for $12 billion.

#1 Constellation Brands, Inc. (NYSE:STZ)

-Number of Hedge Fund Holders (as of June 30): 69

-Concentration (as of June 30): 19%

Constellation Brands is one of the most popular stocks among the funds in our database, with 69 of them having reported a stake as of the end of June, down from 71 a quarter earlier. John Armitage, the manager of Egerton Capital Limited, made a big bullish bet on Constellation Brands, Inc. (NYSE:STZ), having established a position that amounted to 1.85 million shares worth some $305 million at the end of the second quarter. The company has a market cap of $33 billion and pays an annual dividend of $1.60 per share, which provides shareholder with a 0.96% yield. So far this year, investors have had to contend with some choppy movements in the stock, which is up by 17% since the start of the year. Analysts at Wells Fargo & Co. have recently reiterated their ‘Outperform’ rating on Constellation Brands, Inc. (NYSE:STZ) and the $185 price target. Goldman Sachs Group Inc has a similar view of the stock, having reiterated its ‘Buy’ rating in July.

Disclosure: none.