To say the markets this year were unpredictable would be a gross understatement. From the get-go, the U.S.-China trade war clouded the broader investment sector. Rumors of a thawing in relations that quickly scuttered resulted in several head-fakes. Still, those who are looking for viable growth options may want to consider beverage stocks to buy.
Why this segment? Early this year, Guggenheim analyst Laurent Grandet noted positive expectations for beverage stocks. In part, Laurent cited better earnings per share potential for beverage-makers over food companies. Ironically, it’s the nasty trade war that made the case for this sometimes-overlooked sector.
Back when the dispute first hit the markets, major soft drink makers announced that they would have to raise prices on their products. Citing tariffs on metal imports, the impacted companies portrayed themselves as geopolitical victims. But it also affirmed the longer-term case for beverage stocks to buy: in short, the packaging is more expensive than the core product.
Another reason to consider beverage stocks to buy is the ever-expanding diversity in this industry. No longer about hydration, sector players offer several brands, each appealing to specific consumer groups. Furthermore, the advent of cannabis legalization via the 2018 farm bill facilitates a new take on this market. As Louis Navellier, a magnate of the investment world, tells it, stocks that thrive through changing markets are “bulletproof stocks.”
Finally, most beverage brands offer a cheap respite from the stresses of this world. In fact, soda sales increased during the Great Depression and the Great Recession. If we do suffer a coming recession – and bear in mind that this is a possibility due to the incurred economic damage – you’ll want to keep close tabs on these seven beverage stocks to buy.
Coca-Cola (KO)
Since Halloween, Coca-Cola (NYSE:KO), essentially the king of beverage stocks to buy, has dropped nearly 4%. I’m not entirely sure if the markets are being rational with KO stock. In October, the iconic firm delivered a solid earnings report. In Grandet’s words, “The top line was driving the strong results…We were expecting 4% organic growth and they delivered 5%.”
Since the earnings report, KO stock became choppy and later incurred some red ink. At the time, investors were satisfied with the growth trajectory but dissatisfied with the earnings potential.
Yet Coca-Cola has found success with premium brands with small packaging. As I alluded to earlier, the small packaging should result in less material use. If that’s not the recipe for better earnings potential for KO stock, I don’t know what is.
Moreover, the company is about to launch Coke Energy in the U.S. next year. Billed as a competitor to energy drinks like Red Bull, the immense popularity of such beverages should provide a catalyst for KO stock. Certainly, you don’t want to ignore it.
Pepsico (PEP)
A perennial rival to Coca-Cola, Pepsico (NASDAQ:PEP) has a long and storied history with its popular competitor. Many years ago, Pepsi ran a taste test against Coca-Cola. Apparently, most folks found that Pepsi tasted better. Personally, I prefer the latter. Still, when it comes to investing, PEP stock provides a far tighter battle.
Like Coca-Cola, Pepsico produced a solid earnings report. In fact, the company did one better, beating expectations on both revenue and earnings. Although its increased advertisement and marketing spending may have worried some investors, Pepsico made good on the cash outlays, especially with sales for its Gatorade brand.
Just as importantly, the beverage-maker expects to meet or exceed its 4% target for organic growth this year. While that provided a temporary bump up for PEP stock, shares have slipped in recent sessions.
Again, I’m not seeing the rationale here. For instance, Pepsico’s sales of its Frito Lay North America division increased 5.5%. That’s despite the societal push for healthier food and beverage options. Thus, you should keep a close eye on PEP stock, which is moving successfully against the grain compared to other beverage stocks to buy.
Anheuser Busch (BUD)
We all know that millennials have different tastes. This is especially the case for alcoholic beverage preferences. Unfortunately for beverage stocks that specialize in beer, younger Americans seem to prefer wine. Still, I wouldn’t let this fact deter you from considering Anheuser Busch (NYSE:BUD) and BUD stock.
For one thing, Anheuser’s Bud Light consistently ranks as the top brand among beer brands in America. From a culinary perspective, I’m not sure why. In my opinion, Bud Light tastes like watered-down urine. And while anecdotal, I’m positive others share my perspective. Still, that doesn’t matter: Americans love Bud Light, and it supports the broader case for BUD stock.
Moreover, Anheuser’s flagship beer has the potential to steal market share among millennials and the emerging Generation Z. According to one study on underage alcoholic drinkers, Bud Light was the overwhelming favorite, irrespective of demographic categories. I’m not sure that’s something to be proud about. Nevertheless, moving forward, BUD stock has the potential to surprise among a younger consumer base.
Boston Beer Company (SAM)
After just getting done explaining that millennials love Bud Light, mentioning Boston Beer Company (NYSE:SAM) in this list of beverage stocks to buy appears contradictory. With younger people achieving a finer taste regarding beverages, SAM stock might suffer from a “low brow” identity. But that’s really not the case at all.
Over the long run, SAM stock has consistently outperformed many other beer specialists. A big reason why is the quality of the products. While some companies offer a mixture of cheap, “fighter brand” beers along with some higher-quality brews, Boston Beer focuses on craft beer. Known primarily for its Samuel Adams brand, this is the beer that true connoisseurs love.
Not only that, millennials agree. In fact, young folks spend quite a bit of cash on quality craft beer. According to one survey, 56% of millennials drank craft beer at least once a week. Moreover, men and women are shelling out $66 and $50 a month, respectively, for premium beer.
And this bodes well for SAM stock. After all, the company sparked the craft brew phenomenon.
Molson Coors (TAP)
In my book, friends don’t let friends drink light beer. But if you have to do it, my main go-to would be Coors Light. A very popular brand under the Molson Coors (NYSE:TAP) umbrella, both Coors and Coors Light have strong marketing presence. But that’s not the reason why I’m including TAP stock in my list of beverage stocks to buy.
As you probably know, Molson Coors has what I consider a pivotal partnership with cannabis firm Hexo (NYSE:HEXO). With mainstream companies moving into the cannabis space, it opens doors for the entire botanical industry. But I’m particularly intrigued with the two companies’ efforts to produce cannabidiol (CBD)-infused drinks. Over the longer term, this could be a game-changer for both TAP stock and Hexo.
CBD is an organic compound of the cannabis plant. Its main claim to fame is that it’s both potent and non-psychoactive, unlike its nearly identical cousin tetrahydrocannabinol (THC). In other words, CBD users get most of the benefits of cannabis without getting high.
While cannabis itself remains a Schedule I drug in the U.S., the 2018 farm bill legalized hemp and hemp-derived products. Technically, that includes CBD, which makes this partnership intriguing for TAP stock.
Monster Beverage (MNST)
Americans love their coffee. According to the Huffpost.com, Americans consume 400 million cups of coffee a day. That makes the U.S. the biggest coffee consumer in the world. As such, it would make sense to put Starbucks (NASDAQ:SBUX) on this list of beverage stocks to buy. Instead, I’m going to go with Monster Beverage (NASDAQ:MNST) and MNST stock.
Part of the reason is that I’m not really feeling Starbucks at this juncture. As I wrote not too long ago, the famous barista is levered to the price of coffee. According to the data I collected, SBUX generally has an inverse relationship with coffee prices; that is, as coffee prices move higher, SBUX swings lower. And from the current monetary environment, many commodities including coffee have inflationary catalysts.
True, energy drinks typically feature caffeine, and caffeine comes from coffee beans. However, many soft drinks utilize artificially sourced caffeine, mitigating the risk of rising coffee prices. Thus, if we have a recession, I could see demand shifting toward MNST stock due to lower manufacturing costs.
cbdMD (YCBD)
Though not technically a beverage company, I believe cbdMD (NYSEAMERICAN:YCBD) deserves a mention here. That’s because as a diverse CBD products retailer, one of the company’s best products is their tincture (or CBD oil).
A tincture is a potent form of CBD that you take sublingually or underneath the tongue. Because of its chemical composition, tinctures absorb into the bloodstream quickly. They’re also incredibly discreet, which makes them popular among professionals.
Furthermore, tinctures are easily accommodated into your favorite drinks. Better yet, cbdMD gives you multiple flavor profile choices, allowing you to craft your unique CBD-infused beverages for cheap.
Of course, cbdMD isn’t alone in making tinctures. What separates the company and therefore YCBD stock, is the focus on broad spectrum products. With this platform, you receive CBD and other cannabinoids and terpenes (essential oils), but without THC.
Not only that, cbdMD has put their products to the ultimate test. Many veteran athletes, including two-time Masters champion Bubba Watson, take cbdMD products and have yet to ping positive for THC. That’s called confidence in your products, which is one of the reasons why I love YCBD stock.
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As of this writing, Josh Enomoto is long HEXO stock and YCBD stock.
