Thinking of some liquid assets for your portfolio? Booze stocks may fit the bill.
You might kick back with a drink on Friday afternoon or take part in a happy hour special, but perhaps you should consider distilling a bit of information about the booze industry.
Americans are drinking more beer, spirits, and wine, according to statistics portal Statista, which reported the industry grew 3% in 2016. And we’re drifting toward the top shelf, too.
There’s strong growth in high-end premium and super-premium brands. The Distilled Spirits Council of the United States said revenues for those increased 50% and 155%, respectively, between 2010 and 2015, with total U.S. spirits sales at $72 billion in 2015.
Editor’s note: Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.
Among the prominent names in the spirits world is Constellation Brands (STZ), owner of dozens of brands, including Corona beer and Robert Mondavi wines. In its January 2017 release, STZ reported earnings of $1.96 a share, a 38% increase over that of the same period last year, according to data from the Earnings Analysis* tab on the thinkorswim® platform from TD Ameritrade.
John Person, president of NationalFutures.com, said he sees why the stock is a favorite of some investors, although given the recent price gains, he said he’s wary of buying these stocks at elevated levels.
“I could see it trade higher, but there is a high premium risk,” he said.
Not every booze stock has a top-shelf rating. For example, analysts have a mixed outlook on Diageo plc (DEO), known for its Johnnie Walker and Baileys brands. Of the 30 equity research analysts who cover the stock, two rated it a sell, 11 have given a hold rating, 15 have assigned a buy rating, and two overweight the company, according to MarketWatch.
And some beer companies have been particularly strained, such as Boston Beer Company (SAM), maker of Sam Adams beer, which has seen its shares lose more than half their value over the last couple of years.
“The beer industry is seeing a lot of competition from microbreweries,” said Person. “But the spring is a seasonally weak time for beers, and it could see more strength going into the summer.”
One key element of future growth may come from an unlikely source: the transportation sector.
In a 2016 research note, Morgan Stanley said the rise in shared rides and driverless cars could mean people may drink more since they’re not worried about driving home.
As the trend toward ride-sharing and driverless cars continues, the impact could be significant. According to the research note, “The total addressable market (TAM) of the global alcohol market is about $1.5 trillion today (1.14 trillion drinks x $1.33/drink). As our base case, we believe greater prevalence of shared mobility (i.e., ride-sharing) in the next 10 years can add 80 basis points to the annual growth rate of the alcohol market (currently about 2.2%).”
The note goes on to say that, beyond 2025, autonomous technology can unlock “an even greater TAM opportunity."
TD Ameritrade offers a variety of account types and investment products to fit your needs.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
TD Ameritrade and the above named third parties are separate and unaffiliated firms, that are not responsible for each other’s services or policies.
* Earnings data/research is provided by unaffiliated third parties.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC, a subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2022 Charles Schwab & Co. Inc. All rights reserved.