Market Overview

5 Alcohol Stocks to Watch


Brewers and distillers are an interesting set of stocks for investors to consider. Often considered to be "vice stocks," alcohol companies can offer investors stability. Alcohol sales tend to be rather recession proof, as consumers buy alcohol both in good times to celebrate and bad times to drown their sorrows. These five companies deserve consideration by investors looking for longer term plays on the global consumer.

1. Boston Beer (NYSE: SAM), the maker of the Sam Adams line of beers, has seen its stock rise to all-time highs. Trading at a forward P/E ratio of 24.5x and PEG ratio of 1.3x, the valuation seems rather lofty. However, Boston Beer has continued to deliver over the past few years, beating earnings estimates for the last three quarters. However, Analysts have recently become less bullish on the stock as it climbs to record prices. With the average target price of $109 below the current price, analysts have an average Hold rating on the stock. Many cite that the story remains in the company, however the stock price is reflecting a high valuation, and so investors may consider adding some Boston Beer to their portfolio on a pullback.

2. Brown Forman (NYSE: BF-B), the maker of liquors such as Jack Daniels and Southern Comfort, has seen success with its diverse product offering. Like Boston Beer, Brown Forman is trading at lofty valuation given current prices and estimates. The forward P/E ratio is currently 22x earnings, a rather steep valuation considering the S&P 500 is trading around 13x earnings. Brown Forman is also trading near the consensus price target of analysts, and so it may be prudent for investors to wait for a pull-back in this stock before entering.

3. Anheuser-Busch InBev (NYSE: BUD). The maker of Budweiser has seen its stock rally nicely in the past few days. The company recently announced that it is considering purchasing the half of Modelo, a South American brewer, that it doesn't already own. Modelo is the maker of Corona, among other brands, and with the purchase would give InBev more than 50% of the American beer market. With sales around the world and increasingly diverse product offering, InBev could be a safe investment for those looking for yield (current dividend yield is 1.9%).

4. Constellation Brands (NYSE: STZ) is another conglomerate that could offer investors a sense of safety in these turbulent markets. With a diverse product offering of wines and liquors, the company looks set to withstand any economy. Trading about 12% below the consensus price target of $25, there is still upside according to estimates.

5. Diageo (NYSE: DEO) is the maker of various liquors and also produces the Guinness family of beers. With a dividend yield above 2% and approximately 6% upside to the consensus price target, this stock could be a good addition to any portfolio looking for long-term returns. With a forward P/E of about 15x, it is trading at a more reasonable valuation than some of its peers.

Posted-In: Long Ideas Markets Trading Ideas


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