Alcohol stocks are funny. While they tend to be very glamorous companies based on the way their products are marketed to consumers, the reality is that it’s a very tough business to make huge gobs of money for extended periods. This has led to the rise of alcohol stocks to buy.
However, one company that managed to deliver for shareholders despite an ultra-competitive industry is Davide Campari Milano (OTCMKTS:DVDCF), the Italian drinks maker whose brands include Wild Turkey, Campari, and Appleton.
I got the idea for this article because of a Bloomberg article hailing the retirement of long-time CEO Bob Kunze-Concewitz, who, in his 16-year tenure, generated a return of 520%, excluding dividends, 33x better than the Stoxx Europe 600 Index, the benchmark for the top European stocks.
I bet you over his 16 years as CEO; he didn’t get paid as much as Warner Bros. Discovery (NASDAQ:WBD) CEO David Zaslav got in 2021, when the media exec pulled in $247 million in a single year.
If you’re a long-time shareholder of Davide Campari Milano, the least you can do is tip Kunze-Concewitz on his way out. He delivered in a big way.
Here are three stocks to buy — in addition to Davide Campari Milano — whose long-term gains will have you humming George Thorogood’s One Bourbon, One Scotch, One Beer.
Brown-Forman (BF.B)
There is no question that Brown-Forman (NYSE:BF.B), the maker of Jack Daniels Tennessee whiskey, has a long and storied history. While Jack and Coke are as iconic as it comes, BF.B makes this list because of its Woodford Reserve and Old Forester bourbon.
And, heck, I’m not going to lie; Brown-Forman is not delivering for shareholders right now. Down more than 3% year-to-date, it’s trailing the S&P 500 by nearly 20 percentage points on a relative basis. As a result of this latest slide, it’s gained just 25% over the past five years, less than half the index’s return. All in all, it’s one of those alcohol stocks to buy.
In May 2013, I recommended Brown-Forman stock, partly because I liked that it was and remains a family-controlled business. Of course, having a 10-year annualized total return of 15.1% didn’t hurt. Today, that 10-year annualized total return is just 9.5%. There is no question its business isn’t firing on all cylinders.
In August, it reported Q1 2024 results that included a 5-cent miss on earnings — $0.48 vs. consensus of $0.53 — with a $10 million miss on top-line revenue. Usually, that sales miss isn’t a problem, but investors notice when you’re sucking gas. However, the company expects 6% revenue growth in 2024 and 7% operating income growth at the midpoint of its guidance.
I have no problem owning a stock that delivers this kind of growth for a product many consider nothing but marketing. Maybe so, but it’s good marketing.
Diageo (DEO)
My apologies to the good people of Diageo (NYSE:DEO). As a result of my conversion to bourbon from Scotch, I’m not contributing my usual volume to your single malt revenue each year. However, Diageo has plenty of fans worldwide that have taken my place.
At the moment, Diageo finds itself in court with Sean ‘Diddy’ Combs over the terms of their joint venture for DeLeón tequila. Earlier in September, the company lost the first step in what will be a lengthy battle with the former rapper turned entrepreneur. The two acquired the brand together in 2014, but Combs argues that Diageo didn’t live up to the terms of their agreement. Diageo tried to get the case thrown out. The judge denied the request.
The tricky part of this lawsuit: Combs alleges that the company promoted both DeLeón and Ciroc vodka as “black brands,” failing to capitalize on the two brands’ premium taste and quality. Diageo, for its part, said it’s invested more than $100 million in the brands, compared to just $1,000 by Combs. As is most often the case, the truth is somewhere in the middle. I know that Johnnie Walker is one heck of a blended Scotch. It grew global sales by 15% in 2022.
Long-term, you can’t go wrong with DEO.
Boston Beer (SAM)
If you follow the drinks business, you’re likely aware of the rise and fall of hard cider and seltzers in 2021 and 2022. Boston Beer (NYSE:SAM) had Truly, the number two best-selling hard seltzer in America, behind only White Claw.
As fast as hard seltzers became a thing, people stopped buying them. Boston Beer was forced to destroy millions of cases in October 2021, opting to eliminate inventory rather than let customers buy skunky products. By then, the damage had been done. Its share price fell from nearly $1,300 in April 2021 to $500 at the time of its October 2021 announcement. Since March 2022, its share price has essentially gone sideways.
The good news is that big institutional investors are jumping back on the bandwagon. Its stock is up 25% over the past 60 days, putting SAM stock into positive territory in 2023. This make it one of those alcohol stocks to buy.
At the end of July, Boston Beer reported its Q2 2023 results. While depletions, shipments, and revenues were down low single digits over Q2 2022, it generated net income of $58 million, 8.8% higher than a year earlier, with a 230 basis point increase in gross margin to 45.4%.
It’s not all the way back, but it’s getting there.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
