Caffeine Beats The Market
Motif Investing searches for “trends, ideas and world events that could create an investment opportunity.”
It then selects 10 to 30 related stocks related to a particular idea and builds portfolios based on their exposure to this idea.
Within the consumer segment, one motif stands out for its low volatility and high returns (although valuation is not the lowest): caffeine.
Motif explains the thesis behind these stocks.
Caffeine is extremely popular around the world. Not only because of its presence in coffee, but also in many of the globe’s most popular drinks, like Coca Cola.
“In the US alone, the coffee industry is worth $30 billion in 2013 with more than 24,000 coffee shops,” the team explains. “Additionally, consumers are gulping down caffeinated energy drinks while worldwide demand comes from the growing middle class in rapidly developing countries. In fact, energy drinks like Monster® and Red Bull® led this segment to grow 60% from 2008 to 2012.”
Below is a chart comparing this motif’s one-year returns versus the S&P 500.
Source: Motif Investing
While the caffeine portfolio surged more than 39 percent over the past year, the S&P 500 rose only 9.94 percent.
In terms of overall allocation, 55.9 percent of the motif’s assets are placed in companies that either produce or sell coffee and related products, 37.3 percent in caffeinated soft drinks stocks, and 6.8 percent in energy drinks.
Now, let’s take a look at the top stocks by allocation in this motif:
- Starbucks Corporation (NASDAQ: SBUX), 28.9 percent
- The Coca-Cola Co (NYSE: KO), 20.5 percent
- PepsiCo, Inc. (NYSE: PEP), 10.3 percent
- J M Smucker Co (NYSE: SJM), 7.9 percent
- Monster Beverage Corp (NASDAQ: MNST), 6.8 percent
- Keurig Green Mountain Inc (NASDAQ: GMCR), 5.9 percent
- Dr Pepper Snapple Group Inc. (NYSE: DPS), 4.3 percent
- McDonald's Corporation (NYSE: MCD), 3.9 percent
- Mondelez International Inc (NASDAQ: MDLZ), 3.5 percent
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