We recently compiled a list of the 8 Best Large Cap Penny Stocks to Invest In. In this article, we are going to take a look at where Ambev S.A. (NYSE:ABEV) stands against the other large cap penny stocks.
On February 4, Brian Jacobsen, the chief economist at Annex Wealth Management, joined a discussion on CNBC’s ‘Power Lunch’ to analyze the impact of tariff threats on markets and supply chains. He thinks that large-cap growth is the way to play tariffs. The conversation centered around whether markets are becoming desensitized to tariff talk or if they remain vulnerable due to the ongoing uncertainty. Jacobsen suggested that the truth lies somewhere in between. Markets might be somewhat inured to tariff discussions, but until these tariffs manifest in data, specifically that which affect profit margins, their full impact remains uncertain. He emphasized that investors face a catch-22: with elevated margins across large-cap stocks like those in the S&P 500, there’s concern about whether companies can pass on price increases without compressing profit margins.
Small-cap stocks are particularly vulnerable due to weaker profit margins and less ability to absorb increased costs from tariffs. Historically, during trade tensions like those seen from 2018 to 2019, large-cap growth stocks performed well because many received exclusions from tariffs. Jacobsen speculated that this might happen again if actual tariffs are imposed. For investors navigating this complex environment, he advised sticking to investment fundamentals and focusing on long-term valuations rather than short-term market fluctuations. He emphasized considering margin pressures and adjusting growth expectations accordingly while seeking a margin of safety for investments. So while markets may show some resilience against tariff threats due to past experiences with similar uncertainties, ongoing fears about potential tariffs continue to affect supply chains and investor strategies negatively. Investors should prioritize fundamental analysis over immediate market reactions when making decisions amidst such volatility.
Methodology
We sifted through the Finviz stock screener to compile a list of the top stocks trading between a market cap of $10 billion and $200 billion and at a share price of less than $5. We then selected the 8 penny stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database, which tracks the moves of over 900 elite money managers.
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).
A close-up on several cans of freshly brewed beer in a commercial brewery.
Ambev S.A. (NYSE:ABEV)
Number of Hedge Fund Holders: 19
Share Price as of February 14: $1.87
Market Cap as of February 14: $29.41 billion
Ambev S.A. (NYSE:ABEV) produces, distributes, and sells beverages like beer, soft drinks, and other alcoholic and non-alcoholic products. It operates in Brazil, Central America and the Caribbean, Latin America South, and Canada. It offers well-known beer brands like Skol, Brahma, Budweiser, and Corona, as well as soft drinks and other beverages under brands such as Guaraná Antarctica, Gatorade, and Pepsi. It distributes products through third-party distributors and a direct distribution system.
Its Brazil operations were the star of its Q3 2024 earnings, with premium beer leading the charge. This segment, which includes brands like Corona, Spaten, and Original, experienced explosive growth, with each brand’s volume surging over 20%. This translates to significant revenue gains and highlights Brazil’s increasing consumer preference for premium beers. Specifically, Corona, Spaten, and Original each saw volume growth exceeding 25%.
The premium beer segment’s strength is crucial for the company’s future growth. As Brazilian consumers continue to trade up to higher-priced options, this segment offers potential for expansion. Ambev S.A.’s (NYSE:ABEV) established brands position it well to capitalize on this trend and drive future profitability.
Overall ABEV ranks 3rd on our list of the best large cap penny stocks to invest in. While we acknowledge the potential of ABEV as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ABEV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
