In this article, we discuss 10 beverage stocks to buy now despite economic headwinds. If you want to see more stocks on this list, check out 5 Beverage Stocks to Buy Now Despite Economic Headwinds.
Morgan Stanley on July 25 categorized Beverages as a “preferred sector” amid deteriorating economic headwinds. The investment advisory sees the beverage industry as a safe haven amid slowing consumer spending, citing pricing power, continued post-pandemic recovery in sales volume, and the moderate industry competitiveness. Sales are expected to climb on the back of higher stay-at-home demand and a gradually ameliorating supply chain.
Sally Lyons Wyatt, executive vice president at Information Resources Inc, told Beverage Industry’s May eMagazine that sports and protein drinks categories are reporting “super strong” performances, with double-digit growth in revenue and units sold. Pent up post-pandemic demand and hybrid work models have accelerated the consumption of sports and protein drinks, as well as coffee beverages.
Similarly, demand for alcoholic beverages is on the rise as Gen Z comes of age, consumers lean towards e-commerce deliveries, and ready-mixed drinks become increasingly popular. As of May 2022, the ready to drink market is positioned to grow by 192.10 billion liters, reflecting a compound annual growth rate of 7.06% from 2021 to 2026. Some of the most notable beverage stocks to buy now despite economic headwinds include Monster Beverage Corporation (NASDAQ:MNST), The Coca-Cola Company (NYSE:KO), and PepsiCo, Inc. (NASDAQ:PEP).
Photo by Gio Bartlett on Unsplash
Our Methodology
We selected the beverage companies that offer robust growth prospects, positive analyst ratings, and solid hedge fund sentiment. Many of these companies pay out a consistent dividend and posted strong second quarter earnings as well.
We have ranked the list according to the hedge fund sentiment which was gauged from Insider Monkey’s Q1 2022 database of 900+ elite hedge funds.
Beverage Stocks to Buy Now Despite Economic Headwinds
10. Nestlé S.A. (OTC:NSRGY)
Number of Hedge Fund Holders: 4
Nestlé S.A. (OTC:NSRGY) is a Swiss multinational food and drink processing conglomerate. Among its wide range of consumable products, Nestlé S.A. (OTC:NSRGY) markets and sells bottled water, coffee and tea, milk, juices, and other beverages. The company announced on May 23 that it is acquiring the Brazilian plant-based food maker, Puravida. Puravida offers “clean label” food with high nutritional value and will help Nestlé S.A. (OTC:NSRGY) expand its local health science business.
Nestlé S.A. (OTC:NSRGY) announced on July 28 its 1H 2022 results. The company reported that earnings per share climbed by 8.1% in constant currency and jumped by 7.3% on a reported basis to CHF 2.33. The company expects organic sales growth between 7% and 8% in 2022. The underlying trading operating profit margin is forecasted to come in at 17.0%. The underlying EPS in constant currency and capital efficiency are also projected to increase.
Berenberg analyst James Targett on July 19 reiterated a Buy recommendation on Nestlé S.A. (OTC:NSRGY) but lowered the firm’s price target on the stock to CHF 128 from CHF 139.
According to Insider Monkey’s data, Nestlé S.A. (OTC:NSRGY) was part of 4 public hedge fund portfolios at the end of Q1 2022, with collective stakes worth $1.80 billion. Tom Russo’s Gardner Russo & Gardner held the leading position in the company, comprising about 9 million shares worth $1.15 billion.
Like Monster Beverage Corporation (NASDAQ:MNST), The Coca-Cola Company (NYSE:KO), and PepsiCo, Inc. (NASDAQ:PEP), Nestlé S.A. (OTC:NSRGY) is one of the beverage stocks to buy now despite economic headwinds.
Here is what Polen International Growth Fund has to say about Nestlé S.A. (NYSE:NSRGY) in its Q1 2022 investor letter:
“We exited the Portfolio’s position in Nestlé in favor of what we believed to be a more compelling investment idea. Nestlé continues to enjoy competitive advantages related to its scale, distribution, and brand equity. We think the management team has positioned the business for success in recent years, with several divestitures along the way and believe the company is still likely to deliver consistent results. That said, our research indicates that returns may be at the lower end of our expected range and other opportunities appear more attractive.”
9. Celsius Holdings, Inc. (NASDAQ:CELH)
Number of Hedge Fund Holders: 15
Celsius Holdings, Inc. (NASDAQ:CELH) is a Florida-based company that sells carbonated and non-carbonated functional energy drinks and liquid supplements. The company distributes its products in North America, Europe, and Asia. Stifel analyst Mark Astrachan on July 21 raised the price target on Celsius Holdings, Inc. (NASDAQ:CELH) to $93 from $77 and maintained a Buy rating on the shares. The analyst increased his sales and adjusted EBITDA projections through 2024, so they came in above consensus. He expects robust sales and share trends from rising brand awareness and significant distribution/shelf visibility expansion. Celsius Holdings, Inc. (NASDAQ:CELH) is positioned to benefit from Bang, the third-largest U.S. energy drink brand, terminating its relationship with PepsiCo, the analyst told investors. He also believes it “makes sense that PepsiCo seeks to acquire or distribute Celsius to replace Bang”.
Among the hedge funds tracked by Insider Monkey, 15 funds were bullish on Celsius Holdings, Inc. (NASDAQ:CELH) at the end of Q1 2022, compared to 21 funds in the prior quarter. Jack Woodruff’s Candlestick Capital Management held the leading position in the company, comprising 930,000 shares worth $51.3 million.
8. Anheuser-Busch InBev SA/NV (NYSE:BUD)
Number of Hedge Fund Holders: 20
Anheuser-Busch InBev SA/NV (NYSE:BUD) is a Belgian alcoholic beverages and soft drinks company. It was founded in 1366 and has a portfolio of about 500 beer brands, including Budweiser, Corona, and Stella Artois, and Bud Light. Barclays analyst Laurence Whyatt on July 11 reiterated an Overweight rating on Anheuser-Busch InBev SA/NV (NYSE:BUD) but lowered the price target on the shares to EUR 77 from EUR 84.
On July 28, Anheuser-Busch InBev SA/NV (NYSE:BUD) posted its Q2 results, reporting non-GAAP earnings per share of $0.73, exceeding market estimates by $0.01. The revenue of $14.79 billion climbed 9.2% year over year, outperforming Street consensus by $190 million.
Among the hedge funds tracked by Insider Monkey, Anheuser-Busch InBev SA/NV (NYSE:BUD) was part of 20 funds at the conclusion of the first quarter of 2022, with collective stakes worth $736.8 million, up from 17 the prior quarter worth $642 million. Ken Fisher’s Fisher Asset Management featured as the leading position holder in Anheuser-Busch InBev SA/NV (NYSE:BUD), with 8.6 million shares worth $521.7 million.
Here is what ClearBridge Investments Large Cap Growth Strategy has to say about Anheuser-Busch InBev SA/NV (NYSE:BUD) in its Q4 2021 investor letter:
“To make room for these new names and optimize the growth profile of the Strategy, we exited two additional positions during the quarter. We sold out of Anheuser-Busch InBev as we see too much work ahead for the world’s largest beer maker to re-ignite sales growth post COVID-19. While the company should benefit from a recovery in the on-premise channel, individual country complexities, the hedging of raw materials, and senior management turnover leave us more confident in the Strategy’s other reopening-related holdings.”
7. The Boston Beer Company, Inc. (NYSE:SAM)
Number of Hedge Fund Holders: 22
The Boston Beer Company, Inc. (NYSE:SAM) was founded in 1984 and is based in Boston, Massachusetts. The company produces and sells alcoholic beverages mainly in the United States, including beers, hard ciders, and hard seltzers. On July 21, The Boston Beer Company, Inc. (NYSE:SAM) posted a revenue of $616.2 million, up 2.2% year over year, beating market estimates by $12.73 million.
On July 22, Credit Suisse analyst Kaumil Gajrawala reaffirmed an Outperform rating on The Boston Beer Company, Inc. (NYSE:SAM) and lowered the firm’s price target on the shares to $385 from $400. The company’s Q2 results reflect a business still suffering from last year’s hard seltzer fallout, and despite new forecasts, clocking in below consensus was a surprise, the analyst told investors in a research note. The analyst believes the new guidance will put a stop to a series of estimate cuts.
Among the hedge funds tracked by Insider Monkey, 22 funds were bullish on The Boston Beer Company, Inc. (NYSE:SAM) at the end of Q1 2022, compared to 32 funds in the prior quarter. Henry Ellenbogen’s Durable Capital Partners is a prominent stakeholder of the company, with 142,550 shares worth $55.3 million.
Here is what Artisan Mid-Cap Fund has to say about The Boston Beer Company, Inc. (NYSE:SAM) in its Q3 2021 investor letter:
“We ended our campaigns in Boston Beer Company. Boston Beer Company sells a focused portfolio of alcoholic beverage brands. In recent years, the company has emerged as one of the leaders in the hard seltzer category, which has grown over 150% in each of the past three years (2018-2020). Boston Beer’s Truly brand, the second-largest seller of hard seltzer, has benefited from this growth and was core to our investment thesis. However, the hard seltzer category’s growth has recently slowed to single digits, falling short of high investor expectations and pressuring Boston Beer’s earnings upside. Truly’s growth was core to our investment thesis, and a recovery is uncertain; thus, we ended our investment campaign.”
6. Keurig Dr Pepper Inc. (NASDAQ:KDP)
Number of Hedge Fund Holders: 30
Keurig Dr Pepper Inc. (NASDAQ:KDP) is an American beverage company that operates through Coffee Systems, Packaged Beverages, Beverage Concentrates, and Latin America Beverages segments. JPMorgan analyst Andrea Teixeira reaffirmed an Overweight rating on Keurig Dr Pepper Inc. (NASDAQ:KDP) and lowered the price target on the stock to $42 from $44 ahead of the company’s Q2 results. The analyst continues to see a favorable risk/reward for Keurig Dr Pepper Inc. (NASDAQ:KDP) shares, in addition to robust channel trends.
On July 28, Keurig Dr Pepper Inc. (NASDAQ:KDP) posted its Q2 results, reporting earnings per share of $0.39, in line with estimates. The revenue of $3.55 billion climbed 13.10% year over year, outperforming market consensus estimates by $170 million. The company also repurchased about 2.5 million of its common stock worth $87.6 million, at an average price of $34.51 per share. Keurig Dr Pepper Inc. (NASDAQ:KDP) lifted its guidance for 2022 net sales growth to the low double-digit range and reiterated its adjusted EPS growth outlook, which the company expects to fall in the mid single-digit range.
According to Insider Monkey’s data, 30 hedge funds were bullish on Keurig Dr Pepper Inc. (NASDAQ:KDP) at the end of Q1 2022, compared to 31 funds in the earlier quarter. Harris Associates is the leading position holder in the company, with roughly 44.5 million shares worth about $1.7 billion.
In addition to Monster Beverage Corporation (NASDAQ:MNST), The Coca-Cola Company (NYSE:KO), and PepsiCo, Inc. (NASDAQ:PEP), elite hedge funds are pouring into Keurig Dr Pepper Inc. (NASDAQ:KDP).
Here is what ClearBridge Investments has to say about Keurig Dr Pepper Inc. (NASDAQ:KDP) in its Q1 2021 investor letter:
“Our underweights in health care and staples contributed to relative performance during the period. We also prefer to act with some caution in a sector where regulatory risks persist. In consumer staples, we are broadly finding valuations uncompelling and sold Keurig Dr Pepper during the quarter.”
Click to continue reading and see 5 Beverage Stocks to Buy Now Despite Economic Headwinds.
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Disclosure: None. “Preferred Sector”: 10 Beverage Stocks to Buy Now Despite Economic Headwinds is originally published on Insider Monkey.
