We recently published a list of 12 Best Brewery Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Monster Beverage Corporation (NASDAQ:MNST) stands against other best brewery stocks to buy according to hedge funds.
The global alcohol industry is currently grappling with strict regulations, high taxes, inflation, and rising costs, which are likely to persist and may squeeze the profit margins of alcohol producers. The global brewing industry had been hit particularly hard as beer production worldwide fell to 1.88 billion hectoliters last year, representing a YoY decline of 0.9 %.
Peter Hintermeier, Managing Director of BarthHaas, commented:
“After we had managed to post modest growth in 2022 despite unfavorable conditions, we were expecting another small increase in 2023. However, energy, raw materials, packaging, logistics, and labor costs remained at a high level, which put pressure on the brewing business in many countries.”
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The American brewing industry is also faced with a declining demand, as beer consumption in the US last year fell to its lowest level since the 1970s, according to the Brewers’ Association. In fact, in 2022, the American spirits industry surpassed beer in revenue for the first time ever. The trend then continued in 2023, driven primarily by the spirits RTD category. Nevertheless, the country’s major brewers were still in good financial health, thanks to rising prices and a consumer shift towards more expensive, often imported beers.
A major factor behind the decreasing demand is also global drinking habits have shifted dramatically over the last few years. The modern consumers are increasingly focused on health and wellness and seek alternatives to traditional alcoholic beverages, giving rise to the rapidly growing low and no-alcohol trend. To make sure they don’t miss out on the opportunity, several industry behemoths have hopped on the zero-alcohol bandwagon and are now offering products with all of the taste and none of the booze.
Despite the aforementioned challenges, the alcohol sector can be an attractive option for investors looking to diversify their portfolios, simply because of the buffer it provides during tough economic times. An analysis by Goldman Sachs has revealed that beer and spirits volumes in the American market have shown little correlation with economic growth. Their sales are more related to the general trends of alcohol consumption per capita rather than the general state of the economy. This is because beer and spirits are often seen as affordable luxuries or even staples.
According to a study by Cambridge University, the decreasing levels of average per capita income lead to very small changes in gross alcohol, wine, and beer consumption. In fact, the surge in unemployment during recessions could instead trigger an increase in the average alcohol intake.
A great example of this is how Americans drank more alcohol during the pandemic and this was also reflected in the resultant imposts collected by the national kitty. Alcohol tax revenues collected by the U.S. Treasury Department rose by 8% in the fiscal year that ended on Sept. 30, 2021, compared to the previous year, and remained well above pre-pandemic levels.
Another popular investment vehicle in the alcohol industry is rare whiskeys. Aptly named ‘Liquid Gold’, this beloved liquor can preserve and even increase in value during economic instabilities, inflationary periods, and recessions. One simply cannot forget about the bottle of The Emerald Isle Collection that sold in auction earlier this year for $2.8 million, or the 1975 cask of Ardbeg single malt which was acquired by a private collector in Asia in 2022 for over $20 million, more than double the amount Glenmorangie paid for the entire Ardbeg distillery and all its stock in 1997.
The Rare Whisky 101 Apex 1000 Index tracks whiskeys that are highly sought after for collection. It has gained over 384% since 2013, against almost 301% gains by S&P’s famous benchmark of the top 500 companies for the same period. The RW Japanese 100 Index, which includes 100 collector’s bottles from Japan, has seen gains of around 350% since 2015. The index includes bottles like Ichiro’s Malt ‘Card’ Ace of Spades, Ace of Diamonds, and King of Hearts, among others.
Methodology
To collect data for this article, we scanned Insider Monkey’s database of 900 hedge funds and picked the top 12 companies operating in the brewing sector with the highest number of hedge fund investors. When two or more companies had the same number of hedge funds investing in them, we ranked them by the revenue of their last financial year instead. Following are the Beer Alcohol Stocks Held by the Most Hedge Funds.
At Insider Monkey we are obsessed with 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 shelf filled with a variety of bottles of energy drinks, juices, and sodas in a convenience store.
Monster Beverage Corporation (NASDAQ:MNST)
Number of Hedge Fund Holders: 35
Next in our list of the Best Alcohol Stocks is one of the biggest names in the global energy drinks market, Monster Beverage Corporation (NASDAQ:MNST), known for brands like Monster Energy, Relentless, and Burn. The American beverage forayed into the beer sector in 2022 when it acquired the CANarchy Craft Brewery Collective in a deal worth $330 million. The acquisition gave Monster ownership of CANarchy’s craft breweries including Cigar City, Oskar Blues, Deep Ellum, Perrin Brewing, Squatters, and Wasatch.
Monster Beverage Corporation (NASDAQ:MNST) is facing challenges in its home country, as the energy drinks market in the US has shown signs of weakness. However, despite these issues, the company has managed to improve its market share in the domestic market both in volume and dollar terms, indicating that Monster’s brand strength and aggressive marketing strategies are effective in maintaining its competitive edge.
Monster Beverage Corporation (NASDAQ:MNST)’s globalization strategy also seems to be paying off as international sales now account for approximately 40% of its total revenue. The geographic diversification also reduces the company’s reliance on the tough domestic market, where it faces increasing competition from local brands. Monster’s partnership with Coca-Cola’s global distribution network also provides it with a significant competitive edge in international markets. However, while a globalized portfolio is beneficial to most firms, it also carries its risks and Monster took a significant revenue hit from the ongoing hyperinflation in Argentina.
Monster Beverage Corporation (NASDAQ:MNST) also remains committed to innovation and has recently launched several new drink flavors including Monster Energy Ultra Vice Guava and Oskar Blues NA beer in the US, Monster Ultra Peachy Keen in Mexico, and Monster Ultra Violet in Australia, among many more.
Monster Beverage Corporation (NASDAQ:MNST) still needs time to develop its beer business though, as net sales of its Alcohol Brands segment declined by 6% in Q3 of 2024, primarily due to the decreased sales by volume of craft beers. That said, the company remains committed to returning value to its shareholders and repurchased $534.7 million worth of its common stock during the quarter.
Overall, MNST ranks 3rd on our list of best brewery stocks to buy according to hedge funds. While we acknowledge the potential for MNST to grow, our conviction lies in the belief that some 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 MNST 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.
