x
Gated Content

4 Alcohol Stocks to Watch While You Social Distance

Alcohol stocks may appear to be a good play in the age of Covid-19. After all, everyone’s stuck home with little to do beyond eating, drinking and watching Tiger King. It certainly is reasonable to think that under these circumstances, the alcohol industry could see a bit of a boon.

Before we look at the situation the alcohol industry finds itself in right now, let’s take a look at the alcohol industry and how alcohol stocks have been doing prior to the coronavirus.

Glasses containing different types of alcoholic drinks. Here are some alcohol stocks to watch.

The Alcohol Industry

An alcohol stock is a sin stock. That means it belongs to an industry that many people find ethically problematic. After all, we are all familiar with the problems that alcohol consumption can cause.

Nevertheless, sin stocks have long held an attraction to certain investors. After all, sin stocks have a reputation for being somewhat recession-proof. The theory is that people are going to spend money on their booze even when times are rough. In fact, they may even increase consumption in order to deal with the fact that times are tough.

Does this conventional wisdom hold up? Not always. In fact, during the 2008 financial crisis that led to the Great Recession, Diageo and Constellation Brands, two of the largest alcohol stocks, performed poorly.

While some people expect alcohol stocks to remain noncyclical, there is another theory. That is that alcohol is a luxury. It’s certainly not an “essential” the way food is. And because luxury goods are part of a consumer’s discretionary spending, they may cut back on this luxury in hard times.

Another problem that the alcohol industry has been facing is the adoption of healthier lifestyles. As people care more about what they are putting into their bodies, they are consuming less alcohol.

This has helped to contribute to a decline in alcohol sales for several years now. 2018 represented the third year in a row that alcohol sales were down. And it was, by most accounts, a terrible year for alcohol stocks.

After all, everyone’s stuck home with little to do beyond eating and drinking.

Some Good Signs for Alcohol Stocks

There are positives for alcohol companies though. For one thing, strong brand recognition like Budweiser and Bacardi have has helped give those brands pricing power in the marketplace. And the ability to command higher prices can lead to increased revenues.

Another plus for the industry is that brands that have a global distribution network are able to keep their cash flows high despite what may be happening in particular localized markets.

Also, not all alcoholic beverages are the same. Despite the continued dip in alcohol sales in 2018, sales in spirits rose to command 37.4% of the liquor market. Craft beer sales also have tended to remain strong.

Alcohol sales for the week ending March 21 rose 55% year over year as people stocked their pantries for social distancing regiments and shelter-in-place orders. The surge in sales was largely driven by spirits like tequila and gin, which increased at a clip of 75%.

Beer purchases were up by 66%, while wine sales only increased by 42% year over year. Deliveries and a massive surge of online orders have driven the sales spikes. But Nielsen Vice President Danelle Kosmal has predicted that we’ve now seen the peak of alcohol demand.

Still, with trends like virtual parties and happy hours continuing to occur, perhaps we’ll see a sustained increase in year-over-year alcohol sales.

Alcohol Stocks to Watch

Alcohol stocks have not been faring well on the year so far. While the S&P 500 is down only about 16.5% on the year, liquor stocks have sunk about 33%. One can infer that investors have experienced great fear, as restaurants and bars have been forced to close their doors to dine-in service.

Still, not all alcohol stocks are created equal. We’ve put together this short list of alcohol stocks to watch in the coming weeks. You may be able to pick something up from the bargain bin.

Keep Reading This Article and Find Out the Top Alcohol Stocks to Watch Right Now!

Enter your email below to read the rest of this article and reveal the alcohol stocks you should be keeping your eye on.

You’ll also be opted in to receive our free daily e-letter, Investment U, where you will find our expert investment insight, analysis and stock picks for all the best investment opportunities.

You’ll also receive occasional special offers from Oxford Club and our affiliates. You can unsubscribe at any time. Privacy Policy | Newsletter FAQ

Nunc ut lorem quis urna auctor ornare quis in sem. Donec sodales viverra ante, et scelerisque libero iaculis sit amet. Phasellus fermentum vitae tellus quis suscipit. Ut bibendum aliquet odio, a venenatis augue fermentum at. Nunc fringilla dui lorem, congue blandit ex egestas in. Vestibulum dapibus orci ut felis consequat euismod. Sed pretium, risus vel blandit porttitor, diam diam sodales dui, in lobortis lorem ex vitae est. Nullam ac venenatis massa. Integer blandit, diam et fringilla semper, nulla dui suscipit urna, eget hendrerit quam ex rutrum tellus. Nam imperdiet, nibh nec mollis vulputate, felis ante posuere leo, at ultrices nulla neque vitae mi.Nunc ut lorem quis urna auctor ornare quis in sem. Donec sodales viverra ante, et scelerisque libero iaculis sit amet. Phasellus fermentum vitae tellus quis suscipit. Ut bibendum aliquet odio, a venenatis augue fermentum at. Nunc fringilla dui lorem, congue blandit ex egestas in. Vestibulum dapibus orci ut felis consequat euismod. Sed pretium, risus vel blandit porttitor, diam diam sodales dui, in lobortis lorem ex vitae est. Nullam ac venenatis massa. Integer blandit, diam et fringilla semper, nulla dui suscipit urna, eget hendrerit quam ex rutrum tellus. Nam imperdiet, nibh nec mollis vulputate, felis ante posuere leo, at ultrices nulla neque vitae mi.

Integer blandit, diam et fringilla semper, nulla dui suscipit urna, eget hendrerit quam ex rutrum tellus. Nam imperdiet, nibh nec mollis vulputate, felis ante posuere leo, at ultrices nulla neque vitae mi.Nunc ut lorem quis urna auctor ornare quis in sem. Donec sodales viverra ante, et scelerisque libero iaculis sit amet. Phasellus fermentum vitae tellus quis suscipit. Ut bibendum aliquet odio, a venenatis augue fermentum at. Nunc fringilla dui lorem, congue blandit ex egestas in. Vestibulum dapibus orci ut felis consequat euismod. Sed pretium, risus vel blandit porttitor, diam diam sodales dui, in lobortis lorem ex vitae est. Nullam ac venenatis massa. Integer blandit, diam et fringilla semper, nulla dui suscipit urna, eget hendrerit quam ex rutrum tellus. Nam imperdiet, nibh nec mollis vulputate, felis ante posuere leo, at ultrices nulla neque vitae mi.


About

Brian M. Reiser has a Bachelor of Science degree in Management with a concentration in finance from the School of Management at Binghamton University.

He also holds a B.A. in philosophy from Columbia University and an M.A. in philosophy from the University of South Florida.

His primary interests at Investment U include personal finance, debt, tech stocks and more.

Articles by
Related Articles