Five Alcohol Stocks That Hedge Funds Are Betting On

The Brewers have posted average gains of 12.05% over the past twelve months, and there is something very dramatic taking place in the industry, the merger of the two largest companies, which is expected to close in the second half of 2016 provided regulatory approval is received. We decided to find out which companies in the industry smart money is betting on in order to provide some investment guidance to the retail investors.

We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.

#5 Boston Beer Co Inc (NYSE:SAM)

Investors with Long Positions (as of September 30): 24

Aggregate Value of Investors’ Holdings (as of September 30): $271 Million

While the total number of hedge funds holding Boston Beer Co Inc (NYSE:SAM) in their portfolios decreased by three during the third trimester, the aggregate value of their holdings appreciated by about 2.5%. So far this year Boston Beer’s shares have slumped by nearly 30%. The craft brewer has little to worry about from the consolidation taking place in the industry as the market for craft beers is expanding fast. The analysts at Mintel believe that the segment will see sales rise by 22% in 2015 to $24 billion as part of a trend expected to last through 2020. Eashwar’s Krishnan‘s Tybourne Capital Management boosted its stake in Boston Beer Co Inc (NYSE:SAM) by 96% during the third quarter to some 553,000 shares valued at $116.48 million.

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

Investors with Long Positions (as of September 30): 25

Aggregate Value of Investors’ Holdings (as of September 30): $1.15 Billion

Even though Diageo plc (ADR) (NYSE:DEO)’s stock price fell by 8.5% during the third quarter, the total number of hedge funds that were long the stock inched down by one and the subsequent decline in the aggregate value of holdings was just $1.2 million. Since the beginning of this year the stock has depreciated by just over 4%. JP Morgan upgraded the company to ‘Overweight’ from ‘Neutral’ last month. Tom Russo‘s Gardner Russo & Gardner is the largest stockholder of Diageo plc (ADR) (NYSE:DEO) within our database as it owns some 9.28 million shares of the company.

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

Investors with Long Positions (as of September 30): 49

Aggregate Value of Investors’ Holdings (as of September 30): $5.34 Billion

The $195 billion brewer is currently seeking regulatory approval for its $108 billion merger with SABMiller, a marriage of the world’s two largest brewers that has raised questions about the survival of other craft brewers in the market. However, the management of the two companies argues that he purpose of this transaction is not to put other brewers in U.S. out of business, but to position themselves better for new markets in Africa, Asia, and Central and South America. The total number of hedge funds backing Anheuser Busch Inbev SA (ADR) (NYSE:BUD) grew by eight during the July-September period, while the value of their total holdings increased by 23%. Soroban Capital Partners, managed by Eric W. Mandelblatt, owns about 9.14 million shares of Anheuser Busch Inbev SA (ADR) (NYSE:BUD).

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

Investors with Long Positions (as of September 30): 64

Aggregate Value of Investors’ Holdings (as of September 30): $4.87 Billion

Constellation Brands, Inc. (NYSE:STZ)’s stock price has rocketed by nearly 42% so far this year. Cowen & Co recently upgraded the company to ‘Outperform’ from ‘Market Perform’ and raised the price target to $170 from $135. During the third quarter the total number of hedge funds with exposure to the company increased by two while the value of their holdings jumped by 17%. Michael Lowenstein‘s Kensico Capital owns about 6.63 million shares of Constellation Brands, Inc. (NYSE:STZ) valued at $829.91 million.

#1 Molson Coors Brewing Company (NYSE:TAP)

Investors with Long Positions (as of September 30): 70

Aggregate Value of Investors’ Holdings (as of September 30): $3.07 Billion

The $16.94 billion brewer recently entered into a definitive agreement with Anheuser Busch Inbev SA (ADR) (NYSE:BUD) to acquire SABMiller’s 58% stake in MillerCoors for $12 billion if the AB InBev’s own merger with SABMiller goes through. MillerCoors was formed as a joint venture between SABMiller and Molson Coors in 2008 in an attempt to better compete with AB InBev. During the third trimester the number of funds holding Molson Coors Brewing Company (NYSE:TAP) rose by four, while the total value of their holdings increased by $960 million. The company’s stock price has registered gains of more than 25% since the beginning of this year. Mason Capital Management, led by Kenneth Mario Garschina, owns about 3.55 million shares of Molson Coors Brewing Company (NYSE:TAP).

Disclosure: None