When I grew up back in the 1980s and 1990s, most Americans were fairly apathetic when it came to politics. For the most part, older people focused on making money, spectator sports and shopping. Meanwhile, young people loved playing and watching sports, parties, listening to music and dancing. But now, politics has obviously become a major preoccupation of most Americans. And as a result, I believe that this contentious, drawn-out election season is an excellent time to buy alcohol stocks.
Traditionally, many Americans drink alcoholic beverages while watching their favorite sports teams perform. And now that so much of the country is extremely passionate about politics, I’m sure a high percentage of Americans enjoyed beer, wine and liquor as they cheered on their favorite candidate.
Additionally, many political junkies will toast their candidate’s win or drown his loss with some adult beverages. And in the next few months overall, with the holidays and the winter coming, it’s a good bet that the consumption of alcohol will be high.
With all of that in mind, here are three good alcohol stocks that investors can buy to exploit these trends:
Now, let’s dive in and take a closer look at each one.
Alcohol Stocks to Buy: Diageo (DEO)
The company specializes in selling liquor all over the world. In recent years, Diageo has benefited from a trend towards liquor and away from beer. Also boosting the company’s financial results has been an increase in the number of middle-class consumers in emerging-market countries.
In the second quarter, during the heart of the pandemic, Diageo’s sales fell 8.7% year-over-year to 11.8 billion British pounds. However, it still generated a hefty operating profit of 2.1 billion GBP. And as more bars and restaurants open around the world, its results should greatly improve this quarter. But, as with all of these names, DEO stock should get a meaningful boost as a vaccine for the novel coronavirus is distributed in the coming months.
Thus far in November, DEO stock has risen more than 20% — indicating that investors have become more upbeat on the shares. Additionally, it has an appealing 2.9% dividend yield and a reasonable forward price-earnings (P/E) ratio of 23.5.
Despite the pandemic, Anheuser-Busch’s top line rose 4% year-over-year during Q3, while its total sales volume increased 1.9% YOY. Also, the beer-maker’s earnings per share fell to 79 cents from $1.22 the same period a year earlier, as the company’s supply-chain costs increased.
In turn, company CEO Carlos Brito said that the beer maker had generated strong revenue and profit growth in the U.S. last quarter, driven by “the success of Bud Light Seltzer…and the strength of Michelob Ultra, consistently the fastest share gainer in the beer category….”
In my July column on BUD stock, I predicted that the company would benefit from strong beer consumption in the U.S. amid lockdowns and widespread unemployment. Furthermore, I anticipated that “seltzer will be a growth category” for the company — driven by the popularity of Bud Light Seltzer and the company’s two other popular spiked seltzer brands.
Another catalyst for BUD stock, like the other names on this list, is that is should benefit from reduced lockdowns. And, in the latter half of 2021, the relaunch of live, mass-audience events could return as well.
So, although Anheuser may lose some sales due to reduced “despair drinking,” the company’s positive momentum should more than offset that trend. Thus, it is one of the top alcohol stocks to consider.
Alcohol Stocks to Buy: Constellation Brands (STZ)
Incredibly, Constellation Brands’ operating income jumped 17% YOY in Q2 to a hefty $839 million. And while net sales dropped 4% YOY, the company generated a strong $1.2 billion of free cash flow in Q2.
The company has its own seltzer offering, Corona Hard Seltzer, which helped generate double-digit-percentage sales growth for the company’s Corona brand. Meanwhile, the operating margin of its wine and spirits business increased an impressive 310 basis points from the same time last year to nearly 26%.
Moreover, Morgan Stanley recently upgraded STZ stock to “overweight” from “equal weight.” Collectively, the firm thinks the stock’s price is attractive, and believe its growth should accelerate in the “Longer-term, ex-COVID….” Also, in the wake of the company’s Q2 results, Cowen kept an “outperform” rating on the name and raised its estimates for the firm, partly due to what it called “strong” sales of hard seltzer.
Therefore, STZ stock has plenty going on to make it one of the alcohol stocks to buy.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.