We recently compiled a list of the 10 Best Liquor Stocks To Buy According to Short Sellers. In this article, we are going to take a look at where Molson Coors Beverage Company (NYSE:TAP) stands against the other liquor stocks.
Short selling is a strategy where traders profit from the decline in the price of a stock or other securities. It is when traders can borrow shares and sell them, hoping to purchase them back when they are cheaper. The strategy allows traders to capitalize on stocks or markets they feel are overvalued, giving them more opportunities to make a profit.
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Short sellers in America had a tough year in 2024, as the broader US market posted gains of over 23%, building on a gain of over 24% from 2023. The two-year uptick of 53% is the highest since the almost 66% rally in 1997 and 1998. As a result, short sellers were down $180.9 billion in last year’s mark-to-market losses, representing a decrease of approx. 15% on an average short interest of $1.2 trillion. The sectors where shorts performed the worst are, unsurprisingly, Information Technology and Communication Services, as tech stocks surged the most last year. However, the European market has recently been a popular playground for short sellers amid the region’s sluggish economic and earnings growth and political instability in France and Germany.
The alcohol sector also seems like an attractive option for short selling, especially after the recent advisory by the US Surgeon General Vivek Murthy that consuming alcohol increases the risk of at least seven types of cancer, including breast, colon, and liver cancer. The report claims that alcohol consumption in the US is directly linked to approximately 100,000 cancer cases and 20,000 deaths annually. As such, Mr. Murthy has proposed to put cancer warning labels on alcoholic beverages, signaling a shift toward more aggressive tobacco-style regulation for the sector if adopted. The Surgeon General also called to reassess the guidelines on alcohol consumption limits, so consumers can weigh the risks more accurately.
The advisory also managed to impact the financial market, sending down the stocks of several major alcohol players in the country, in some cases by over 3%. This comes at a time when the alcohol sector is already facing some major headwinds, including a downturn in sales following the pandemic boom, threats of looming tariffs, competition from alternative beverages, and the rapidly rising trend of abstinence. More and more Americans, especially the younger generations, are becoming increasingly conscious about health and wellness and saying ‘no’ to alcohol. According to the National Institute on Alcohol Abuse and Alcoholism, America’s per capita annual consumption of alcohol in 2022 was 2.5 gallons, down from 3.28 gallons in the early 1980s.
However, this shift has marked a new opportunity for the alcohol industry, which has responded by flooding the market with a wide range of low- and no-alcohol beverages. The strategy seems to be paying off, as according to Nielsen, non-alcoholic beer, wine, and spirits collectively surpassed $565 million in sales in 2023, up 35% from the year before.
There are also doubts over how effective putting warning labels on alcoholic beverages will be since ingrained habits are hard to change and similar labels have done little to curb smoking. Some experts remain optimistic. Paul Gilbert, an associate professor at the University of Iowa College of Public Health, believes that it is unlikely that people will immediately change their drinking habits following the Surgeon General’s report, but it could eventually lead to changes in how people perceive their risk.
Methodology:
To collect data for this article, we looked up the 20 Largest Publicly Traded Liquor Companies in the US and then picked out the ones with the lowest short percentage. The stocks are sorted in descending order of their short interest, as of December 13, 2024.
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A wide-angled shot of a brewery showing the large machinery used for producing malt beverages.
Molson Coors Beverage Company (NYSE:TAP)
Short % of Shares Outstanding: 4.4%
Molson Coors Beverage Company (NYSE:TAP) is a multinational beverage and brewing giant with a diverse portfolio that includes a variety of beer brands, spirits, and non-alcoholic beverages spread across the Americas, Europe, the Middle East, Africa, and Asia Pacific. With a 4.4% share of the global beer production, Molson Coors is the 5th-largest brewer in the world.
Molson Coors Beverage Company (NYSE:TAP) was among the companies that benefited the most from the infamous Bud Light controversy in 2023. The stock surged by over 16% between March 2023 and March 2024. However, those gains seem to be running out of steam. The brewing giant had a tough Q3 2024 as net sales declined 7.8% YoY to reach $3.04 billion, missing the analysts’ estimates by over $89 million. Its US financial volume also dropped by 17.9%, underscoring the vulnerability of the company’s market position. Analysts estimate that Molson Coors has lost approximately 48% of the market share gains it had previously secured due to the resurgence of competitor brands, such as Busch Light and Michelob Ultra.
That said, Molson Coors Beverage Company (NYSE:TAP)’s core brands remain healthy. According to Circana, in the US, Coors Light, Miller Lite, and Coors Banquet retained a substantial portion of their combined volume share gains in Q3 versus a year ago, when we saw strong share increases. In fact, in terms of volume percentage growth, its Coors Banquet brand is the fastest-growing top 15 beer brand in the US this year so far.
In response to the changing consumer preferences, Molson Coors Beverage Company (NYSE:TAP) is now strategizing to reshape its brand portfolio and focus on higher-margin segments. The company announced the divestiture of several of its craft beer brands, a move that aligns with its long-term strategy of emphasizing premiumization and expanding into the Beyond Beer segment.
Molson Coors Beverage Company (NYSE:TAP) maintains a strong balance sheet and generated $856 million in underlying free cash flow for the first nine months of 2024 while investing meaningfully in its business and returning $717 million in cash to shareholders through both dividends and share repurchases.
Overall TAP ranks 10th on our list of the best alcohol stocks according to short sellers. While we acknowledge the potential for TAP as an investment, 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 TAP 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.
