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 Monster Beverage Corporation (NASDAQ:MNST) 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 shelf filled with a variety of bottles of energy drinks, juices, and sodas in a convenience store.
Monster Beverage Corporation (NASDAQ:MNST)
Short % of Shares Outstanding: 2.24%
Monster Beverage Corporation (NASDAQ:MNST) engages in the development, marketing, sale, and distribution of energy drink beverages and concentrates. As one of the biggest names in the global energy drinks market, the company is renowned for brands like Monster Energy, Relentless, and Burn. The beverage giant also forayed into the alcohol 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, which now operate under the name Monster Brewing Co.
The American energy drinks market is going through an unprecedented slowdown, driven by a reduction in consumer spending and lower foot traffic in the convenience channel. However, despite these macroeconomic headwinds, Monster Beverage Corporation (NASDAQ:MNST) has proven to be resilient. The company has managed to outperform its competitors and 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 venture into the brewing sector still needs time to develop 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.
Monster Beverage Corporation (NASDAQ:MNST) remains committed to expanding its footprint on a global level. The company’s international sales now account for approximately 40% of its total revenue, reducing its reliance on the challenging domestic market. The international emerging markets are especially attractive for Monster in particular. As disposable incomes in these regions rise and Western consumer trends gain popularity, the demand for energy drinks is likely to go up. The company’s strategic partnership with Coca-Cola’s vast global distribution network also provides it a competitive edge in international markets. However, such aggressive international expansion carries its risks and Monster took a significant revenue hit from the ongoing hyperinflation in Argentina in Q3 2024.
Overall MNST ranks 7th on our list of the best alcohol stocks according to short sellers. While we acknowledge the potential for MNST 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 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.
