One would imagine that due to months of bar closures and all-round economic downturn, alcohol sales will have been crippled. Though there has been some decline in 2020, many alcohol brands are starting to show signs of life again as bars reopen and they adapt to the needs of a pandemic.
Luckily for these companies, they had already been forced to adapt to a changing consumer in recent years, with alcohol consumption declining year after year in favor of alternatives. Companies like Boston Beer (NYSE: SAM) and Anheuser (NYSE: BUD) have been making huge investments in alternatives such as seltzer and alcohol-free brands, while good ol’ ‘Mary Jane’ is also attracting interest from the likes of Molson Coors (NYSE: TAP) and Constellation Brands (NYSE: STZ), which has a significant stake in weed producer Canopy Growth (NYSE: CGC).
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Now, after months of uncertainty surrounding coronavirus, alcohol is making a comeback, and we believe that these 3 brands represent a promising investment.
Let’s start off with the fancy stuff as Brown-Forman (NYSE: BF.B) is actually one of the largest wine brands in the world. The Jack Daniels parent company gained much attention in recent months as a ‘consumer staple’ stock, with prolonged lockdowns driving consumers to higher personal alcohol purchases. While this did not offset the losses caused by closed restaurants and bars, it has shown that the brand’s popularity remains intact among regular shoppers.
The company’s stock has rallied almost 40% since its March lows, almost completely recouping its 2020 losses so far as of June 2. This was boosted by encouraging signs at last month’s Q1 earnings report, where it was revealed that premium brand sales were on the rise, including its popular Woodford Reserve bourbon, which saw sales jump 17%. Known as a slow and steady stock — rising just under 60% in 5 years — Brown-Forman is looking more like itself again after the coronavirus sell-off. It managed to avoid total disaster during the worst periods of lockdown and represents a solid investment for anyone looking at a consistent long-term stock.
Constellation Brands is one of the largest alcohol producers on the planet, with its fingers in beer, wine, spirits, and weed pies. Constellation boasted a nice little 1.6% dividend yield in 2019 and has managed to bring its products to more than 150 countries. In what has been a trying number of years for the alcohol industry, Constellation has taken the initiative to diversify its holdings through its $4 billion investment in Canopy Growth. Though this venture has thus far yielded only losses, it gives them an early foothold in an industry that analysts believe could be worth close to $75 billion by 2027.
Things are starting to really pick up for Constellation after it reported Q2 earnings on July 1 which proved that, despite a pandemic, civil unrest, economic downturn, and all the rest, people just need a drink sometimes. Adjusted earnings per share came to $2.30 on revenue of $1.96 billion to beat expectations, even though beer sales fell 4% — hopefully unrelated to the company’s unfortunately-named Corona beer. Having weathered the worst of 2020 so far, rallying roughly 80% since its March lows, and with businesses reopening, Constellation could be looking at a much stronger quarter in Q3, making it my preferred growth alcohol stock right now.
Even though Guinness would be my beverage of choice at any bar, there is no bias going into my decision to include Diageo (NYSE: DIO) in this list. Whether we examine Diageo pre-virus or look back on it post-virus, there are few companies that can boast brands that attract customer loyalty like this one. That’s what makes its current low price such a unique bargain as it’s a company that will have still have a number of very popular brands in 100 years.
Having suffered a complete price collapse in mid-March, the Bailey’s parent company has rallied 35% but still remains 20% off of its 52-week highs. Diageo is not without risk, currently holding on to about $13 billion in debt, which could become a problem should bars and restaurants close once more. Though revenue has suffered due to the coronavirus — as has the entire industry — it is crawling its way back to the top, and with over 200 different brands in 180 different countries, it should have no problems regaining its former highs. It is not just one of my favorite alcohol stocks, but one of my top buy-and-hold stocks overall.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.
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Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.